Dairy processors warned by watchdog

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ABOVE: Supermarkets raise milk prices with money going to farmers. (Photo: Australian Dairy Farmers)

AUSTRALIA’S consumer watchdog has warned dairy processors not to mislead farmers about milk prices, following reports of processors blaming their private-label milk contracts with supermarkets for low farmgate prices.

The Australian Competition & Consumer Commission says farmers are paid the same price irrespective of whether their milk goes into private label or branded products. These findings were based on detailed evidence provided by supermarkets and processors.

The ACCC has heard reports from dairy farmers in New South Wales and Queensland – struggling to cover costs in the face of drought – claiming processors say they cannot pay farmers more for their milk because of the low A$1-a-litre (55.65p) price for private label milk.

ACCC chairman Rod Sims says dairy processors need to be honest with farmers.

“We have written to a number of processors warning them not to mislead farmers by blaming private label milk contracts for the prices offered for milk at the farmgate,” he says.

“We’re concerned this is misleading as the power lies with processors to raise the farmgate price paid to farmers, and then pass these higher farmgate prices on to supermarkets.”

Sims says almost all contracts between processors and supermarkets for the supply of private label milk allow processors to pass-through movements in farmgate prices to supermarkets.

“This means processors set their farmgate prices independent of the supermarkets’ retail prices,” Sims says.

The Australian milk supply chain works by farmers selling their products to dairy processors who process and package the product. Supermarkets then buy the packaged milk from the processors, both private label and branded products, and sell it to consumers.

With the drought raging, two supermarket giants are temporarily raising some milk prices to help the farmers.

Coles and Woolworths were introducing a drought-relief milk line at a price of A$1.10 (61.2p) a litre, with 10 cents (5.55p) of this paid directly to dairy farmers.

Agriculture Minister David Littleproud says Aussies can now back farmers at the checkout.

“It’s up to consumers to show they want a fair go for farmers by buying this milk,” he says. “It’s a small investment to keep our farmers on the land.

“Ten cents a litre may not sound like much but it’s huge for our farmers, many of whom are losing money every day, or struggling to break even.”

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