Farmers and processors both deserve more money from retailers

By Ross McInnes, QDO Vice-President

Queensland Dairyfarmers’ Organisation (QDO) fully supports processors in their attempts to increase the price of all dairy produce in retailers with the goal to improve the value of the entire supply chain. However, farmers are rightly frustrated when processors ask for more from retailers but, in the same breath, pay us less.

Farmers need a viable processing sector, and processors need a viable farm sector to supply a sustainable raw product. There is no doubting that processors’ costs have increased in recent times. But so have farmers’. My electricity price for irrigation went up by 10.8% this month and is over 350% over the last eight years. The farm sector’s terms of trade has reduced by more than eight cents per litre since 2011 started and no doubt, the processors figures would be similar.

Since the decision was made in 2011 to dramatically discount white milk in Australia, QDO and Australian Dairy Farmers (ADF) have consistently condemned retailers’ actions that have negatively impacted farmers. The white milk processors of the dairy industry have been severely impacted by the introduction of discounted milk, but many continue to supply to supermarkets that stop their brands from reaching higher values. The pressure from the retail sector on processors to tender ‘competitive’ prices is clear when factoring the power retailers have over processors in controlling the distribution of processors’ full range of products.

Within our region Norco has held their price, Lion has reduced their price and Parmalat is seeking a reduction through arbitration. Twelve months ago, Murray Goulburn reduced their NSW farm gate price by nearly five cents per litre and their implosion allowed other processors to reduce their milk cost as well. Processors have now used the NSW situation to justify a degradation of the Queensland price.

Processors deserve more from retailers, but farmers also deserve more. Cost increases affect us all, except the major supermarkets it would seem.