Aussie milk wars to spawn new co-op

12/08/2012

Supermarket wars in Australia have led to sharp falls in the price of milk and  farmers have been paying for it in reduced returns.

However, the supermarkets might have gone too far. Farmers are planning to establish a rebel trading company to compete with the dominant processor, Lion, and supermarkets:

Documents obtained by The Australian show the Dairy Farmers Milk Co-operative — representing 780 dairy farms in NSW, Victoria, Queensland and South Australia producing a billion litres of milk a year — has proposed to its members they consider quitting supplying Lion.

Instead, DFMC is launching a rival co-operative to compete with its own Lion-bonded supply arm.

Instead of being contracted to sell milk only to Lion processing plants — and having to accept the prices Lion offers — the new breakaway group will be free to trade milk across Australia to the highest bidder.

The move follows Lion’s shock announcement last week that it is cutting prices to dairy farmers for off-contract milk supplied to its popular Pura, Dairy Farmers and Big M milk brands to just 12c and 13c a litre in Queensland and northern NSW respectively, and 15c in other parts of NSW, Victoria and South Australia. . .

Farmers in New Zealand are paid for kilos of milk solids and the current forecast payout for this season is  $5.95 – $6.05.

The forecast payout of  $7.50 k/ms in May last year was equivalent to about 66 cents a litre. Someone whose maths is better than mine is welcome to convert this season’s payout to cents a litre, but you don’t have to do it exactly to understand it is still more than 12 to 15 cents even when converted to Australian currency.

That price is simply unsustainable for farmers as one who left a letter to Coles supermarket explained:

A LETTER to Coles posted on its Facebook page by a NSW dairy farmer went viral at the weekend, attracting more than 73,448 “likes” and 4500 comments before it was blocked by the supermarket giant.

But the action by Coles backfired badly, with dozens of online supporters of 31-year-old teacher and farmer Jane Burney re-posting the letter online.

In her letter, Ms Burney, who milks 400 cows at Oxley Island near Taree with her husband says the discounting $1/L milk price war waged by Coles and Woolworths is ” killing the lifeblood of our dairy industry”.

“The ramifications of it are finally rearing their ugly head, 13c per litre of milk is not sustainable; the only winner is the supermarket,” she wrote. . .

Your latest ad campaign sprouting that you support Aussie growers is insulting and misleading; eventually all the Aussie growers, all dairy farmers who work 7 days a week, 14 hours a day, who have been dairy farming their whole life, will have to stop farming as it is no longer economically viable to continue.” . . .

Consumers here complain that too little competition between supermarkets is keeping the price of milk too high.

In Australia the competition has been too fierce for farmers who’ve been caught in the crossfire.

There might be enough of them to make the new co-operative a success but it will have to be strong to stand up to the existing players.


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