World Milk Day to highlight the crisis within the Queensland dairy industry. What you need to know.

Saturday June 1 is World Milk Day. It is meant to be a celebration of the dairy industry and an acknowledgement of the value of dairy in our diet and lifestyle.

This year however, we need the International Milk Day to be used to highlight the desperate state of the dairy industry in Queensland.

The bald fact is that the Queensland dairy industry can no longer meet its domestic market consumption requirements and we are unlikely to recover production volumes to meet domestic demand.

Drought conditions and the poor farmgate price for raw milk have led many farmers to sell up and leave the industry. Not only is this devastating for the farmers, their family and communities involved, but it is sad for all Queenslanders who love their dairy.

On average, Australians consume 102 litres of fresh milk per person, per year.

In years gone by, around 95% of all milk produced in Queensland went into fresh milk product; that is, fresh bottled milk. The 5% remaining was used by small processors manufacturing boutique cheeses, yoghurts and ice-cream. Now, milk needs to come from interstate to meet our state’s consumption.

Consumers and the media are somewhat fickle in their attention to the climate conditions that farmers are still facing. The rain received in the coastal regions over the Easter period led most Queenslanders in major cities to believe that the drought that was so widely covered by the media in 2018, was over.

Only one month ago, the Queensland Government was forced to extend the drought declared mapping area to include all the Scenic Rim and Lockyer Valley, Burnett and Rockhampton regions. Now a staggering 65% of Queensland is drought declared and the Bureau of Meteorology do not have any hopes of unseasonable falls over the coming months.  

Farmers continue to struggle with the price of feed and now water for irrigation is fast becoming a point of major contention across Australia.

The end of $1/L milk was certainly a win for dairy farmers in Queensland. It not only gave farmers a price increase but clearly showed the market that farmers would no longer accept retailers setting a minimum RRP for fresh milk.

One thing however still mars the success of the campaign. It is a widely held misconception that those farmers supplying a processors without a generic contract currently receive no income from the 10-cents a litre.

It is in fact only a portion (around 30%) of most farms’ milk that is allocated to private label (Coles/Woolworths/Aldi and IGA home brands) receives the 10-cent price increase. What this means is that farmers are on average receiving only around 3-cents more per litre across their full volume.

“We didn’t hear a single complaint from shoppers when the price of private label milk increased by 10 cents. As our research showed, shoppers are happy to pay more if it helps the farmers and helps ensure they get fresh milk in future. This doesn’t just apply to cheap milk, but to branded milk too” said QDO Vice President Matthew Trace.

“Unfortunately, help has come too late for many farmers and we’ve lost the ability to supply 100% Queensland made milk unless farmers can make a sustained profit.

While our farmers appreciate the price increase and appreciate the support that consumers have shown, the 10-cents increase needs to be applied to all the milk we produce. All processors need to utilise the opportunity that the end of $1/L milk provides them. They have to have the guts to increase the RRP for branded milk and pass that full increase back to their farmers. That way they will be able to secure their milk supplies by ensuring that dairy in Queensland is profitable” said Mr Trace.

ENDS

Dairy processors to get tougher when dealing with supermarkets.  

After the positive movement in the dairy industry over the last few weeks due to Woolworths’ decision to abolish $1/L milk, it seems somewhat backward that stories like the one below are being reported following last week's Australian Dairy Conference. Dairy associations across Australia have been trying to get processors to stand up to retailers for years.

However, the power imbalance, predatory pricing behaviour and threats to the continuance of contracts and/or shelf space real estate have left processors in a no-win scenario.

While QDO believes the processors could be doing more to support their farmers, it also acknowledges that the power of the major retailers is a key issue within the value chain that, with the backing of the ACCC report, continues to be swept under the carpet.

Having heavy hitter Saputo enter and expand its portfolio within Australia, may very well signify the change we need to make significant headway towards a sustainable dairy industry.

Please read the article published this week in the Weekly Times below.

Dairy processors believe they need to get tougher when dealing with powerful supermarket chains.

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Saputo chief executive Lino Saputo told the Australian Dairy Conference in Canberra last week processors had a responsibility to demand the real value of dairy products when negotiating with retailers to ensure a fair return at all stages of the value chain.

“I go back to Murray Goulburn agreeing to a contract for $1 a-litre milk,” Mr Saputo said.

“It doesn’t make any f … ing sense.

“When you think about $1.10 milk, it isn’t enough. All the 10 cents should go to the dairy farmer.

“Milk at $1.10 (a litre) doesn’t make any sense when you buy water for $3 a litre or soda pop at $4 a litre and those Powerades and Gatorades at $5 a litre.

“It doesn’t make sense when you look at all that work that goes into producing that milk and processing that milk and get it to shelves to sell it for $1 a litre.

“We have a responsibility as processors to be responsible when we are negotiating with the retailers to demand what is the real value for dairy products.”

Bega Cheese chief executive Paul van Heerwaarden said similar arguments could be made for supermarket branded cheese.

Mr van Heerwaarden said it took 10 litres of milk to manufacture a 1kg block of cheese.

“A block of cheese gets sold for $6. That’s 60 cents a litre,” he said.

“There is a need for us to properly have a conversation with the retailers and drive that (message) through.”

Mr Saputo said that if processors did not have those conversations, it “allows the retailers to believe that is the value of dairy”.

Norco chairman Greg McNamara said the dairy industry was also being degraded by supermarket chains placing drought levies on milk and asking for donations from consumers at check-outs, saying “it devalues everything that we as farmers do”.

“We do not want a generation of welfare recipients,” Mr McNamara said.

“We want a generation of farmers that are business savvy and spend the money in the right spots.”