UPDATED: Pressure is mounting on other supermarkets to show more support for drought-weathered dairy farmers after Woolworths and Coles effectively acknowledged soaring farm input costs, lifting their private label milk prices.
Coles will maintain the increase until January and Woolworths is planning a new “drought relief” range.
Shoppers will immediately pay 30 cents more for a three-litre bottle of house brand milk at Coles and Woolies, now selling at $3.30.
It is the first increase in private label milk prices in Australia since January 2011 when Coles started a competition war by slashing house brand milk retail values almost 30c/litre.
Woolworths intends to launch its new drought relief range in mid October in Queensland, NSW, ACT and Victoria, priced at $1.10/litre, $2.20 for two litres and $3.30 for three litres.
The short term drought range, in the full cream and lite categories, will see the extra 10c/litre generated from sales going direct to dairy farmers in drought affected areas.
This new range provides customers with a choice, safe in the knowledge the extra money will flow to dairy farmers in drought
The 10c increase matches calls by farmers, including Australian Dairy Farmers and the particularly vocal Queensland Dairyfarmers Organisation, wanting a 10c milk price rise across the board, preferably indefinitely, to help improve returns to farmers paying at least 100 per cent more for hay, silage and grain in recent months, plus big energy price rises in the past year.
QDO has campaigned nationwide in the past fortnight, gaining qualified support for its price increase call from Prime Minister, Scott Morrison, and federal Agriculture Minister, David Littleproud, plus about 105,000 consumer signatures.
Woolworths will also work with its house brand fresh milk suppliers who source milk from drought affected regions to set up a drought relief oversight committee, ensuring the extra money went to dairy farmers.
Fresh food director, Paul Harker, acknowledged customers had told the retailer they wanted to help and were prepared to pay more for their milk to do so.
“This new range provides customers with that choice, safe in the knowledge the extra money will flow to dairy farmers in drought affected areas.”
He said dairy farmers were “doing it tough in the face of the drought and we’re keen to support them”.
Until the new drought relief range hit the shelves, the retailer’s existing three litre milk house brand line would sell for $3.30 in the eastern mainland states to get relief flowing to dairy farms as quickly as possible.
Coles responded soon after Woolworths announced its plans saying it, too, wanted to support its farmer supply base and would increase its three-litre Own Brand milk in all states immediately, until the end of the year.
All the increase would be donated to farmers, although not specifically to dairy farmers.
“Coles and our customers have already committed almost $12 million to drought relief, including $5m from the Coles Nurture Fund to assist drought-affected farmers,” the company said in a statement.
The money would be donated through the National Farmers’ Federation’s 2018 Drought Relief Fund.
Woolworths’ Mr Harker said the three litre range represented about half the supermarket’s house brand milk sales.
However, he noted Woolworths branded milk sales still accounted for less than five per cent of Australia’s total milk production.
“The ACCC has made a number of sensible, evidence based recommendations that address core issues impacting the dairy industry,” he said, referring to the national consumer watchdog’s support for reforms such as a mandatory code of conduct to improve farmer bargaining power in price negotiations with processors,” Mr Harker said.
“While government and industry work through the long-term reform agenda needed to ensure future generations of dairy farmers can prosper, Woolworths drought relief price increase is about easing some of the immediate pressure brought on by drought.”
Queensland’s peak dairy farmer body has claimed discount retailer Aldi has been verbally supportive of the 10c/litre price increase call, if other supermarkets were involved.
However, QDO’s campaign for a co-ordinated price lift across the milk category to help farmers has been rebuffed by some retail officials uneasy about supermarkets potentially being seen to collude on prices and therefore breach competition laws.
I’m very disappointed by Coles – they’ve let down their suppliers by not ensuring the money goes back to the dairy farmers. It is outrageous
Advocacy body Dairy Connect welcomed Woolworths’ support, including the establishment of an independent oversight group with an auditor and dairy representatives to ensure Woolworths’ price increase went to farmers via their processors.”
However, chief executive officer, Shaughn Morgan, was not happy Coles had decided to spread its milk levy funds to the wider farm sector rather than the farmers who supplied the milk.
“I’m very disappointed by Coles – they’ve let down their suppliers by not ensuring the money goes back to the dairy farmers. It is outrageous,” he said.
“Surely if Woolworths could have the increase go directly to dairy farmers (via the establishment of an oversight committee) then so could Coles.”
Mr Morgan hoped the supermarket shift on $1/litre milk was only a first step.
“The price increase on fresh milk must become permanent, with resulting higher farm-gate prices paid to dairy farmers.
“We must ensure Australia has long-term sustainable dairy industry ensuring the livelihood of future generations of dairy farmers.
“We’re still calling on supermarkets to increase the prices of dairy products generally so that processors are able to pass on higher farm-gate prices to dairy farmers for their fresh nutritious milk.”
Peak farmer body ADF wants all dairy farmers to get the benefit from any increase in retail milk prices.
“What we really need is clarity around how that extra 10c will be distributed back to the farm gate in a way that all dairy farmers will benefit,” said Australian Dairy Farmers president, Terry Richardson.
“There are many regions of Australia affected by drought with high production costs impacting thousands of dairy farmers.
“We look forward to working with Woolworths on how this will work in practice.”
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