Peak dairy farmers body says home brand milk price must be lifted to $1.50 a litre

Fifty cents of the higher price should be passed straight back to struggling producers via their processors, the Australian Dairy Farmers (ADF) said.

In October the Senate Rural and Regional Affairs and Transport Committee launched an inquiry into the performance of Australia's dairy industry and the profitability of dairy farmers since deregulation in 2000.

Its terms of reference included investigating the merits of asking the ACCC to consider how it could regulate the price of milk paid by processors to farmers to ensure a viable dairy industry.

The committee, which will report next March, was also asked to look at alternative approaches to supporting a viable dairy sector and the introduction of a mandatory industry code of practice.

In a 74-page submission to the inquiry written by its policy director, Craig Hough, the ADF said supermarkets should raise the price of their home brand milk to $1.50 a litre to stop dairy farmers leaving the industry.

NSW Farmers brought the $1.50 litre proposal to the ADF's national council in November and it was adopted as national policy.

Another member of the ADF family, the Queensland Dairyfarmers Organisation, had also been arguing for a lift in the retail price of home brand milk.

The ADF said the price increase could be implemented immediately and should remain in place until changes were made to the Food and Grocery Code.

"It is time for the Australian Government to intervene in establishing an agreed set of retail pricing standards for dairy products on retail shelves," ADF said.

Under a revamped Food and Grocery Code, fixed prices for dairy products should be abolished and replaced with prices determined according to supply and demand fluctuations.

The code should also establish a universally agreed margin for farmers to remain viable and sustainable, the ADF said.

The ADF said dairy farmers' profitability had been hit by a number of impacts since industry deregulation in 2000 including drought, increasing costs, an international dairy price downturn and aggressive promotion of $1 a litre home brand milk in 2011.

Across Australia the average dairy farm had experienced a 71 per cent rise in farm gate prices since 2000 but a 142pc lift in production costs.

Vittoria Bon, government and industry relations manager for Coles, told the inquiry in early December that Coles home brand milk represented just 3.3pc of Australian production so any lift in its price would not resolve the significant issues facing the dairy sector.

She said Coles had increased the price of its $1 a litre by 10c in March to help boost farmers' incomes.

In its submission the United Dairyfarmers of Victoria said it did not support the re-regulation of the milk industry or the introduction of a floor price.

However, the UDV supported further investigation into the viability of new trading platforms to give farmers the option to supply milk on the open market.