Can we trust them? QDO takes on watchdog role following Coles' announcement.

Coles’ announcement that they intend to bypass processors and start a direct relationship with dairy farmers came as surprise to most within the industry and many are trying to determine what position to take. Given Coles’ previous history with the dairy industry, it is difficult to trust the intentions of the supermarket giant.

While Woolworths has had a direct relationship with farmers through Farmers’ Own, this brand competes with other premium branded white milks at a price point above $3 for 2 litres. Coles, however, intends to sell its farm direct milk as its private label.

Coles has previously committed to ensuring all of the additional 10c/L added to its milk price is passed through to farmers. It would be expected that this latest announcement will see dairy farmers who supply Coles receive 10c/L, or around $1.30/kg of milk solids, above previous prices they received.

In their statement, Coles cites its existing ‘successful’ direct producer relationships to show that this proposed model can work to provide health profit margins for both retailers and the farmers.

The 2018 ACCC report into the dairy industry identified the imbalance of power within the value chain as the key to the failure of the dairy industry. The Mandatory Code of Conduct for the dairy industry, that is currently being drafted as a direct result of this report, seeks to address the imbalance of power between farmers and the processors.

As individual small business owners, farmers have struggled to negotiate with multinational processors for a fair farm gate price. One must question then, what hope an individual farmer will have to negotiate a fair and sustainable farmgate price when they go up against the might of Coles.

 The fact is that Coles is capitalising on consumer sympathy for the dairy industry. The massive support that consumers gave dairy farmers during last year’s Drought Relief campaign has prompted Coles to use this to boost sales of its discount product lines over branded milks. Consumers will undoubtedly believe that this new arrangement has been designed to benefit the farmer and therefore support it.

 “At this stage, the nuts and bolts of how and what this relationship and process will look like is pure speculation, with only Coles knowing truly what its intentions are” said QDO Executive Officer, Eric Danzi.

 “We need to work with the supermarket giant to increase the RRP price of fresh milk to pre-2010 pricing. In today’s market that would equate to around $1.50/L. which would allow farmers to receive a fair farmgate price.

 What we need to ensure is that this does not give Coles even more power over dairy farmers and does not allow Coles to revert to $1/L pricing”.

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Federal Labor to introduce dairy floor price if elected.

THE Federal Opposition has given the clearest indication yet that a dairy floor price will be introduced by Labor if elected on May 18.

Re-regulation of the sector was floated as an option by Opposition Leader Bill Shorten earlier this year, committing to improve conditions for dairy farmers if Labor won Government.

Shadow Agriculture Minister Joel Fitzgibbon last week said structural problems in the dairy sector “could not be overcome without government intervention.”

“You can somewhat rebalance the market power between processors and dairy farmers, but dairy farmers will be made price takers,” the Labor frontbencher said.

“So I formed a view that the only way you really help dairy farmers is to set a minimum farmgate milk price. Not a ceiling but a floor price.

It means you would have an entity, possibly the ACCC, determine what is the average price of production in each dairy region, because every dairy region is very different. And having determined that average price, set a minimum price somewhere just above the cost of production.”

United Dairyfarmers of Victoria president Paul Mumford said the organisation welcomed either a Labor or Coalition government working to improve the fortunes of the dairy sector over the next three years.

“Whether a floor price is the right solution, we wait to see, but Joel Fitzgibbon said he would work with the ACCC to evaluate the situation,” Mr Mumford said.

The Australian Dairy Industry Council approached the Howard government in 1999 to deregulate the drinking milk sector.

All state governments then repealed legislation governing milk prices, with state-based milk authorities wound up by July 2000.

The move had a mixed result for farmers nationally, with Murray Goulburn and Bonlac offering higher farmgate prices in Victoria and Tasmania in 2000-01 but a marked decrease for NSW and Queensland producers during the same 12-month period.

Mr Fitzgibbon was asked by The Weekly Times how an Australian floor price would operate in competition with imported produce from New Zealand.

“If we are arguing that the only way to be internationally competitive on export markets is to pay our farmers at or below the cost of production, then we’ve lost the argument,” the NSW MP said.

“If we’ve got to underpay our farmers to be internationally competitive, it’s a market we shouldn’t be in, quite frankly. But that’s not the outcome we want. Of course, we want to be in the market, we want Australians drinking milk produced here in Australia and other dairy products. They are literally facing a crisis at the moment, particularly in areas like northern Victoria. If we don’t have government intervention, we will lose our dairy industry.”

Source: Weekly Times

Coles faces further backlash for refusal to lift the price of milk.

A fourth-generation dairy farmer says he would prefer to give his milk away for free than sell it as a loss for the benefit of the major supermarket.

Dairy farmers are so “angry and disappointed” with Coles for refusing to hike its milk price he is threatening to tear up his contract with processor Norco.

Woolworths announced earlier this week it will add an extra 10 cents per litre to benefit struggling farmers who would receive “every cent” of the price increase.

But Coles resisted calls to follow its rival, citing cost of living pressures on customers when defending the company’s decision.

Paul Weir, a fourth-generation dairy farmer in northern NSW, is in the top 10 per cent of Norco’s producers with a supply of 2.5 million litres of milk a year, the ABC reported.

The cooperative is contracted to process milk for Coles.

“Full credit to Woolworths for doing it, but words can’t describe how angry and disappointed we are with Coles’ stand,” he told the national broadcaster.

“We’re in one of the worst droughts in history, milk’s dropping down to one of the lowest records in a long time, and everyone around here is doing it tough, feed costs have gone through the roof.

“The fundamental problem is that it’s well under the cost of production, and if this industry is going to be sustainable we need a price rise across the whole dairy cabinet — milk, cheese, yoghurts, butter, the whole lot.”

Mr Weir told the ABC he had contacted Norco asking for an early release from his contract unless the major supermarket changes its tune on the price of milk.

“Their business values and mine just don’t agree, I choose not to do business with people like that and I don’t want any of my milk going through a Coles for them to make profit out of it while I’m sitting here making a loss on it.

“I would much prefer to give my milk away in front of a Coles shop then actually let Coles sell it as a loss just for them to profiteer on it.”

Rather than lift the price of milk, Coles said earlier in the week it would be collecting donations for dairy farmers and matching every dollar raised from Monday.

“One thing I can’t do as CEO of Coles is disadvantage our customers at a time when clearly they’re under household budget strain,” said Coles chief Steven Cain after handing down the company’s first half-year result on Tuesday.

“We’ve been one of the main supporters of farmers, we’ve distributed nearly $16 million so far, but it’s important that we don’t disadvantage Coles customers.”

"Woolworths is getting rid of $1 milk. It’s time Coles and Aldi got behind dairy farmers and did the same.

Federal Agriculture Minister David Littleproud on Tuesday took the drastic step to call on shoppers to boycott both Coles and Aldi for refusing to lift the price of its budget milk.

He accused the supermarket chain of “pretending” to be a decent corporate citizen and Aldi of “hiding under the stairs”.

Dairy farmers struggling with drought needed an end to Australia’s “$1 milk disaster”, he said, a price war that began eight years ago and has been blamed for sending some farmers to the wall.

“Publicity stunts like (Coles) asking shoppers to donate at the counter to help struggling farmers are just a smoke screen to hide the fact they pay bugger-all for milk,” Mr Littleproud said.

“The farmers wouldn’t need donations from the public if Coles and Aldi paid fair prices.”

A Coles spokesperson told news.com.au that it continues to support the dairy farming industry.

“Coles has been exploring additional options in relation to how to best support Australia’s hard working farmers, including how we ensure that drought assistance initiatives are as efficient and effective as possible,” the spokesperson said.

“Coles is committed to finding a better model that can be adopted by the industry to assist Australian farmers, and intends to liaise with relevant parties including government and the ACCC.”

Source: News.com.au

Murray Goulburn sale clears ACCC hurdle

The ACCC has approved Saputo’s proposed takeover of MG after accepting a court-enforceable undertaking to divest the Koroit plant.

“Saputo’s divestiture undertaking has remedied the ACCC’s competition concerns about the Koroit plant,” ACCC chairman Rod Sims said. “The undertaking creates an opportunity for a viable competing milk processor to enter or expand in the local region. When approving a new owner of Koroit, we will focus on its ability to be a strong and effective competitor for raw milk in the region.” Mr Sims said the ACCC heard from and spoke with many farmers who expressed concerns with the regulator intervening in this transaction in the short term because they wanted certainty and stability after a bumpy ride with MG.

“I want to assure them our aim is to put in place an outcome that works in their best interest by promoting competition in the medium to longer term while minimising short term uncertainty,” Mr Sims said.

The undertaking also includes details of transitional milk supply arrangements and independent management for the plant until it is sold. The ACCC will issue a Public Competition Assessment in due course that will outline the reasons for its decision in more detail. The sale still has to gain approval from the Foreign Investment Review Board and the EGM to be held on Thursday.