Finance Consumer Dairy farmers look to better days as supermarket milk battles ease
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Dairy farmers look to better days as supermarket milk battles ease

After discounting milk, Woolworths added a drought levy. Photo: ABC
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In the dreamy time before the supermarket price wars, a windy politician could be caught out with the question ‘How much does a litre of milk cost?’

For dairy farmers the nightmare reality is that milk is cheap – too cheap – brought on by supermarket price wars that at one stage saw the product selling for less than $1 a litre.

The final insult that ‘drought levies’ added to the retail price also became a competitive selling point for the grocery chains.

While suburban mums and dad were happily letting the kids splash ever-larger quantities of milk on their bran flakes, dairy farming families were struggling to make ends meet.

But there is a ray of light.

Farmers marked World Milk Day on Monday waiting for their first look at the Mandatory Dairy Code (MDC), in which processors were required to announce prices on June 1.

There’s also a renewed push for supermarket chains to sell milk at a price that more fairly reflects the cost of production.

When the MDC figures dropped on Tuesday prices were not surprising nor spectacular, with a range of $6.06 to $6.70 and an average of around $6.40 per kilogram of milk solids.

The national advocacy body representing farmers, the Australian Dairy Farmers, acknowledged that the prices were generally lower than last year’s opening prices, although prices often creep up as the year progresses.

Farmers last year were receiving as little as 52 cents a litre in some areas before costs, although the plight of some detailed on the SBS program Struggle Street helped turn the tide as Australians rallied to call for a better deal.

ADF president Terry Richardson said on Tuesday the opening prices were a little better than what some analysts predicted, but they still reflect a cautious approach given current market conditions.

“We’re hopeful that the market will improve to provide an opportunity for some price step-ups, because farmers still have to manage high production costs,” Mr Richardson told The New Daily.

“But at least farmers now have an opportunity to assess all opening prices and milk supply agreements, and make a decision as to which processor they want to negotiate with for the next year.”

Australian dairy farmers have been battling ill winds in their industry for the past decade, with the price they receive for their product hammered by the major supermarkets’ battle for market share.

Add the impacts of climate change and drought requiring a move to more feed for their herds and the costs have increased, while the return has diminished.

The industry has also been fighting a rearguard action against plant-based products that are mislabelled as milk.

And the battle is not just an Australian phenomena, with up to 30 per cent of United States farmers going out of business in recent years as costs rise and European farmers offer a cheaper product in the market.

On Tuesday, Agriculture Minister David Littleproud renewed his attack on major supermarkets over milk prices, accusing Woolworths of gimmicks instead of helping farmers.

Woolworths said this week it would extend its 10-cent levy on its home-brand two-litre and three-litre milk, which it says will see $30 million flow to producers.

woolworths $1 milk
Tough life: Farmers have struggled to make their cows pay their way. Photo: AAP

But Mr Littleproud claimed it was merely another promotion for home-brand milk – the product that has caused so much angst for farmers.

“It is utterly disrespectful of Woolworths to try to capitalise on World Milk Day with this pitiful offering, duping consumers into thinking the dairy farmers are getting genuine help from the supermarket,” he said.

“The supermarkets aren’t listening to me or dairy farmers when we are clearly saying they need to restore the value they stripped from the dairy industry with $1-a-litre milk.”

Woolworths claims the levy is a bonus to the farm gate price.

“Our levy has provided much-needed relief to dairy farmers and we’re grateful for our customers’ support of the program,” he said.

The ADF has backed the supermarket chain, although it said the initiative needed to be built into the farm gate milk price in the long term.

“We are now looking for Coles, Aldi and other retailers to follow Woolworths’ lead and publicly state their commitment to continue their arrangements,” ADF chief executive David Inall said.

In a submission last year to the Senate inquiry into the performance of the dairy industry since deregulation, the ADF recommended the price of generic milk brands be raised to $1.50 per litre until changes are made to the Food and Grocery Code to establish a distribution that reached dairy farmers.

“If we are to stop farm exits and hardship, then all retailers need to increase the price of their store brand retail fresh milk to $1.50 per litre with the increase going back to farmers via their processors,” Mr Inall said.

-with AAP