Funding Dairy Services

Investing and Leveraging - The Levy at Work

Since its creation in July 2003, Dairy Australia has invested an average of $57 million a year in real terms in programs and services to:

• increase farm productivity;
• develop value added, high margin markets, channels and products; and
• promote and protect the unique benefits of Australian dairy.

Funding Sources

Farmers

The Dairy Service Levy is calculated on milk production at the rate of 2.6075 cents per kilogram of fat and 6.3558 cents per kilogram of protein.  The levy rate has remained unchanged since 1997.  There are a number of ways to equate levy payments with day-to-day farming operations.  One way is to say that the levy equates to about 0.315 cents for every litre of milk sold at the farm gate.  Based on average per cow production this means the current levy per cow is about $15.80 per year.  A farm is therefore paying about $3150 per year for every million litres of milk produced or 1.0 per cent of the current gross value of their milk income at an average price of 31.5 cents a litre.

Government and the Australian People

During the first three years of Dairy Australia’s operations, the Australian Government contributed approximately $15 million a year towards research and development through matching funds.  These funds are capped at 0.5 per cent of the gross value of product at the farm gate.  Based on the options described in this information kit the Government’s matching funds will not be affected by any change in the Dairy Service Levy rate unless the rate is zero.  The funds are however, affected by any decline in the gross value of production.

Reserves

Dairy Australia was formed in 2003 after an amalgamation of the Dairy Research and Development Corporation and the Australian Dairy Corporation.  The reserves inherited at that time provided the new Company with the increased capacity to respond to unplanned issues and challenges in a way that was consistent with industry’s expectations.  After July 2007, Dairy Australia set aside $10 million as a prudent level of reserves to respond to extraordinary circumstances that might arise for the industry.  To reach that level of reserves, the Company invested $7 million from its total of $17 million (anticipated July 2007) to help offset the lower levy income expected due to the effects of the drought.

Attracting other Research Funds

State departments of agriculture and primary industry along with universities, dairy companies, other commodity research organisations and the CSIRO are all co-investors with Dairy Australia, and help maximise the benefits obtained from the levy.

In addition to Dairy Service Levy funds, these organisations independently invest about $80 million a year in projects that also benefit levy payers.