Dairy's dire warnings

The Senate Committee Inquiry was initiated as a result of Coles' 'Down Down and Staying Down' campaign, which saw the retail price of home brand milk products fall to $1 per litre.

The price plunge was matched by Woolworths and other retail chains followed soon after.

But the dairy industry soon raised concerns about the longer term impacts, starting with processors potentially driving down wholesale milk prices in upcoming contract negotiations.

In support of dairy farmers, Independent Senator Nick Xenophon, Liberal Senator Bill Heffernan, Nationals Senator John Williams and Australian Greens Senator, Christine Milne, have co-signed 'Additional Comments' to the Senate Committee Interim Report.

"While shoppers may be enjoying lower prices at the checkout now, the benefits of the milk price war will inevitably be short lived and could well result, not only in higher prices and less choice for consumers in the longer term, but also significant and irrevocable damage to Australia's dairy industry," the Senators wrote.

The 'Additional Comments' also criticised the Australian Competition and Consumer Commission for its lack of action and the inadequacy of current competition laws.

"The ACCC seems to have taken a 'wait and see' approach but all that means is that we'll watch as our farmers struggle to get a fair price for their milk and by the time the ACCC steps in, it could be too late," Senator Xenophon said.

The Senate Economics Committee will provide a final report on or before October 1, 2011.

The original reporting deadline was April 20 but an extension was granted to allow more time for water to pass under bridge and present hard evidence, given the volume of uncertainty and contradictory statements surrounding the issue.

Senator Xenophon said consumers should know that even though Coles' catchy jingle says prices are 'Down Down and Staying Down', they've already signalled it could end in the next six months.

"So, in fact, prices aren't staying down, but what will stay down is the dairy industry if something isn't done to protect it from the predatory behaviour of the supermarket giants,” he said.

"The market domination of Coles and Woolworths means that dairy farmers around Australia aren't getting a fair price for their milk.

"Thousands of Australian dairy farmers didn't survive deregulation of the industry in the late 90s; many of those remaining may not survive the milk price war."

Senators Xenophon, Williams and Heffernan held a media conference at Parliament house today to back their claims and offer support for the dairy industry.

Senator Heffernan, also a farmer, said Coles and Woolworths held too much market power and dairy farmers needed adequate protection.

He said the difficulty with dairy farmers was the unknown of re-negotiating contracts as they came up.

Senator Williams said the inquiry reporting deadline was extended to October because the inquiry was incomplete and the Committee had not yet seen any hard evidence of the renewed contracts and what actual discounts would occur, at the farm gate.

He said after the Committee saw evidence of contract negotiations, they would be keen to speak to dairy farmers and processors again to assess what discounts they received and what impact it may have on their livelihoods.

Senator Williams said his office had taken many calls from milk producers saying they would come under pressure if the processors lowered their wholesale milk prices, even by 1 cent.

“The margins are very thin not only for the dairy farmers but the processors as well and we know the power of the big end of town and they are flexing their muscles,” he said.

Senator Williams said Coles CEO, Ian McLeod, had said when the strategy first started in late January, that it would not impact farm gate prices but it was wrong.

“It’s already telling on the dairy farmers,” he said.

“I would have spoken to a dozen dairy farmers personally.

“The longer it goes the more we send to the wall then get used to UHT milk, probably imported from overseas.”