Woolies follows Aldi's lead and lifts retail milk price but Coles refuses to follow
Woolworths will today follow Aldi's move earlier this week to lift the retail price of its homebrand milk on supermarket shelves but Coles has rejected calls from dairy bodies to follow suit.
On Wednesday, Stock & Land broke the news that Aldi had lifted its prices and, today, Woolworths will match them, with 1 litre Woolworths branded milk selling for $1.29, 2L at $2.39 and 3L at $3.59.
That afternoon, Coles rejected the calls from farmer bodies to do the same, saying "Aldi's milk prices are a matter for Aldi" and pointing to its move to the direct sourcing of milk from farmers.
Woolworths, however, has made a virtue of being the first to drop dollar-a-litre milk, the source of much anger from farmers, particularly those in states like Queensland, NSW and Western Australia, where most of the milk produced is sold as drinking milk on supermarket shelves.
"In February we were pleased to be the first national supermarket to transition away from $1 per litre fresh milk with the introduction of a nationwide 10-cent-per-litre levy on two and three-litre Woolworths branded milk for dairy farmers," a Woolworths spokesperson said.
"This extraordinary measure was designed to provide much needed confidence and immediate relief to dairy farmers given there had been little to no increase in farmgate prices for some time."
"The benefits of our February price change continue to flow through to more than 450 dairy farmers in full and we stand by this commitment."
"Since February, we have seen farmgate prices increase significantly and they're forecast to continue rising throughout the year.
"As a result of these farmgate price movements, we have been paying our suppliers even more for milk and other dairy products across the category over recent months.
"Due to these ongoing whole-of-market cost pressures, we have reviewed and adjusted the price of Woolworths milk."
Rabobank's latest Global Dairy Quarterly stated competition for milk among dairy companies was driving "record-high opening and forecast closing milk prices in 2019/20."
The high prices come as processors scramble to collect enough milk as farmers respond to drought and painfully high prices for water and stockfeed.
Rabobank expects Australian milk production to close the current season down 8.5 per cent at 8.5 billion litres.
Despite the improvement in milk prices, Rabobank senior analyst Michael Harvey said rebuilding milk supply would be slow.
"Autumn was dry for many dairying regions, leading to ongoing feed shortages," Mr Harvey said.
"Also, many dairy farm operators will need time to rebuild herds.
"With a return to profitability as milk prices improve, an immediate focus will be on repairs and maintenance ahead of major expansion projects."
The bank's forecast for Australian milk production in the 2019/20 season has been revised down, with milk supply now expected to fall by two per cent, taking annual production back to 8.4 billion litres.
NSW-based dairy lobby body Dairy Connect chief executive Shaughn Morgan welcomed the Woolworths announcement but said it was important to address the wider issues associated with supermarket discounting.
"This decision illustrates the market failure that is currently facing the dairy industry throughout Australia," Mr Morgan said.
"It also illustrates that the price paid for fresh, nutritious milk continues to be below that which its should be charged for.
"Dairy Connect calls upon Coles to also increase their homebrand.
"Further, it is hoped that the supermarkets will pass part of this increase through the value chain, via their processors, to the Aussie dairy farmer.
"It will also be vitally important that the supermarkets review the current low prices being paid for in the dairy cabinet generally.
"This is reflected, for example, by cheese imports into Australia making the price of cheese far too low.
"It is vital for the sustainability of the Australian dairy industry that dairy farmers receive a farmgate price that is above the cost of production."
Australian Dairy Farmers spokesperson Ashley Mackinnon said the peak national dairy farmer body was "relieved to see both Woolworths and Coles lock in their previous commitment to pass 10 cents a litre on their fresh milk lines back to farmers."
"We understand the intent of the Woolworths and Aldi price rises is to make that payment sustainable.
"But it also shows that after eight long years, retailers are recognising that dairy has value and are moving the price, just as they would with any other commodity."
Source: Stock and Land 25 July