DAIRY producers, shop owners and farming organisations have joined forces to rally against the major supermarkets’ decision to heavily discount the price of milk.
DAIRY producers, shop owners and farming organisations have joined forces to rally against the major supermarkets’ decision to heavily discount the price of milk.
The parties have outlined their grievances in more than 90 submissions to a Senate committee, which began hearings earlier this week.
The committee will look into the decision by Coles, Woolworths, and independent supermarkets to slash drinking milk prices, and consider the subsequent impact of this move on the dairy industry.
The war on milk prices began on Australia Day, when Coles slashed the price of its home brand milk to $1 per litre.
This sparked a quick reply from rival supermarket giant Woolworths, which followed suit and price matched with Coles.
The Dairy Farmers milk cooperative, which represents 1,820 farmers and 780 dairy farms, said the discounting was a ploy by supermarkets to sell more of their own home brand milk, which they said made up 71 per cent of all full cream milk sales in Australia.
“We believe the decision by Australian supermarkets, led by Coles, to promote their own private label milk products through aggressive price discounts is reckless, short-sighted and damaging to the dairy industry,” Dairy Farmers said.
Dairy Farmers and shop operators are concerned that the price cuts are unsustainable and will cause irreparable damage to the dairy industry.
Bannister Downs Dairy owner Sue Daubney said the large gap between the price of home-brand milk and branded products would lead to a slump in branded milk sales and the farm gate price of milk.
“When the processors go to the farmers to offer prices, they base the milk price on the Australian dollar and the sales growth of the branded products. Selling cheap milk is only going to cause a reduction in the sale of the branded products and that will come straight back to the farmers,” she said.
Unlike the eastern states, Western Australia has only a handful of milk processors – Pura/Masters, Brownes and Harvey Fresh.
WA Farmers Federation dairy section president Peter Evans said WA farmers are some of the worst hit, with more than two-thirds of the state’s milk going into drinking milk and only small percentages of other dairy products being produced locally.
“We have not had the economy to compete with the eastern states. For the past 20 years eastern states processors have been dumping cream, cheese and ice-cream into WA,” Mr Evans said.
Ms Daubney said the number of dairy farmers had declined since deregulation in July 2000.
“There were 484 dairy farmers in 1999, now there are around 164,” she said.
“This was already a seriously declining industry and this is just pulling the carpet from underneath it when it was already in a bad way.”
The National Association of Retail Grocers of Australia chairman John Cummings, who also operates IGA supermarkets in Perth, called for both the state and federal government to take action.
“The Trade Practices Act is not operating effectively to prevent anti-competitive pricing. We need to rely on the government and the ACCC to bring back a level playing field and the state government needs to do more about keeping dairy manufacturers in WA,” he said.
Alternatively, Mr Evans suggested the state government should turn their attention to promoting the export of WA milk.
“Our best opportunity for expansion is fresh milk into Asia; we are three to five days closer to the eastern states so we can get it there with a longer shelf life, this could turn into a lucrative market for us,” Mr Evans said.
Along with many members of WA’s dairy industry, Ms Daubney is convinced that, if no changes are made to the plummeting milk prices, the future of the industry was in peril.
“What is the point of selling something below its cost? It’s like importing a carton for $20,000 and selling it for $18,000. All the supermarkets are doing is killing off an industry,” she said.
