WAFARMERS dairy section members seized the opportunity to grill Coles general manager of corporate affairs Robert Hadler during question time at the WAFarmers annual conference last week.
The group included WAFarmers dairy section president Phil Depiazzi, senior vice president Michael Partridge and Collective Bargaining Group of WA chairman Mike Norton who made the journey to Perth to attend the Coles-sponsored business breakfast.
Following a presentation by Mr Hadler titled “Helping WA Farmers Grow”, dairyfarmers took question time as an opportunity to highlight their concerns surrounding the sustainability of the industry.
Collective Bargaining Group of WA chairman Mike Norton said dairy production was down 4.3% in 2014 and down 12 million litres on last year’s production figures in WA.
Making reference to an industry price sustainability report commissioned by the Collective Bargaining Group of WA, Mr Norton said return on assets for the average dairyfarmer was 1% in 2012/13 and had fallen to -0.8% this year.
“It is all bad news because the contractual arrangements with the company you deal with doesn’t work in producers’ best interests,” Mr Norton said.
“And we’ve got to make a decision before Christmas this year whether we start to terminate those contracts.”
Mr Norton said milk was being trucked into WA from South Australia, a State that was down 6% on production and was already importing milk from New South Wales to top up its own supply.
“This is a crazy situation,” he said.
“You have done research that suggests the consumer wants fresh food, but the marketplace is crucifying a lot of producers in the dairy industry and we need to do something about it to try and alleviate the problems.”
In response, Mr Hadler said Coles secured 100% of its milk locally and did not import milk from SA to top up supply.
“It is only one processor over here that is doing that, they clearly aren’t paying their suppliers enough,” Mr Hadler said.
“Harvey Fresh is currently securing 100% of its milk via WA.
“On face value that says they are paying enough for you to supply them, I know you will never think that is enough.
“There is always going to be price tension, but we’re working hard to ensure that if farmgate prices go up because demand is greater than supply, that will be reflected in the payment we make to Harvey Fresh throughout rise and fall clauses.”
Mr Hadler said Coles could not control the relationship between Harvey Fresh and its individual suppliers because it was a separate contractual agreement.
WAFarmers dairy section president Michael Partridge said it was unfortunate that discounted milk price negotiations had gone on for 3.5 years.
“Three-and-a-half years ago Coles decided to reduce the price of milk and that devalued all drinking milk sold in the country,” Mr Partridge said.
“WA milk is the highest quality in Australia yet WA farmers are getting the lowest price in Australia.
“Four years ago we discussed supply and demand, and Mr Goyder said we obviously had too much milk in the State, and that was why we weren’t getting enough money for our milk.
“Supply has continued to go down, demand has continued to go up and there has been market failure.”
Mr Partridge said it was not market forces that had devalued milk, but rather a conscious choice made by Coles to discount milk.
Mr Partridge said a sustainable price would be about 54 cents/litre at the farmgate for WA producers.
“The NZ price is over 60 cents/litre so we are not asking for world parity, we are asking for a sustainable price,” he said.
In response, Mr Hadler said the discounted debate had been long and had gone over the same ground many times.
“I am happy to say it again,” he said.
“We have disconnected the retail price from the farmgate price.
“We are paying six cents/litre more in the past two years to Harvey Fresh for its milk, they spread that across their total production and I don’t see what goes into individual farmers pockets but we have paid them more and we have still been able to keep the price at a dollar.
“If supply continues to fall and demand is still there and the farmgate prices rise at some stage the retail price might have to go up we’ve always said that but we have not reached that point yet.
“But we’ve always said we have rise-and-fall clauses in the contract, if that goes up we pay our processors more to reflect it at the farmgate and if at some stage that means we have to raise the retail price we will.
“But you can’t argue consistently for the consumers to foot the bill because they won’t.”
WAFarmers dairy section president Phil Depiazzi disagreed with comments that consumers were not able to pay more for their milk.
“I think you need to spin your numbers around because 80% of people could pay more and are willing to,” Mr Depiazzi said.
Mr Depiazzi said that if Coles continued to source milk at an unsustainable price, there would be no WA milk supply in the future.
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