Happy dairy farmers say Coles and Woolies brought milk price hikes upon themselves
Woolworths and Coles are raising milk prices and there may be more price increases to come due to the expected decline in national supply.
Key points:
- Farmers get record price of milk
- They say aggressive low prices are pushing farmers out of the industry, which has led to higher demand now
- Other factors come into play, including lower output from major overseas producers such as New Zealand, the EU and the US
But relieved dairy farmers say supermarkets have caused these sudden price hikes on themselves.
Earlier this week Coles said it would increase home-brand milk by 25 cents, from $1.35 to $1.60 per litre.
Today Woolworths matched those gains, blaming higher supply chain costs, including payments to farmers.
“Farm-level prices paid to dairy farmers have increased significantly this season and as a result we are paying more to our own brand suppliers for milk,” a spokesperson said.
The spokesperson said “processors – not retailers – set the farm gate price paid to dairy farmers” and supermarkets simply passed on this additional fee.
Aldi, who has been proud to offer cheap fresh food, also indicated that he would follow the increase in milk prices.
“We are actively reviewing the retail prices of our dairy range with a view to ensuring our prices reflect additional costs impacting dairy farmers,” a spokesperson said.
Supermarkets are partly to blame, farmers say
A combination of global and local factors are behind the rise in milk prices, including inflation and rising production costs.
Australian Dairy Farmers Association president Rick Gladigau said supermarkets were partly to blame for the sudden price hikes.
In 2011, dairy farmers were shaken when supermarkets cut milk prices by a third and started a $1 per liter milk campaign, led by Coles.
Gladigau said the industry warned at the time that the push would be disastrous.
Now, he said, “everyone goes home to roost.”
“We’ve seen an exodus of farmers, we’re now seeing a shortage of milk in this country,” Gladigau said.
The campaign was compounded by the financial problems of farmer Murray Goulburn’s former cooperative in 2016, when they immediately and retrospectively cut milk prices.
This resulted in farmers being paid less than production costs, triggering a national milk crisis.
Since then 1,510 dairy farming businesses have left the industry and Australian milk production has fallen from 9.5 billion liters in 2015-16 to 8.8 billion liters in 2020-21.
National milk production is expected to fall by 250 million liters by 2021, with production exposed to higher fertilizer and fuel costs, labor shortages and flooding.
Global production down
According to Dairy Australia’s latest outlook report, production fell in New Zealand, the European Union and the United States.
About a third of Australia’s milk is exported and there has been a 10 per cent increase in global exports for the year ending January 2022 compared to last year.
“This has been led by the greater China region, where imports have jumped 18.5 per cent,” Dairy Australia said in its May report.
All of these factors contributed to record farm-level prices offered for the new financial year.
Australia’s largest processors Fonterra, Saputo and Bega pay farmers an average of about $9.40 per kilogram for solid milk.
Small Victoria-based dairy company Bulla is offering an unprecedented $10/kg for solid milk.
Gladigau said the frenzy of bidding by all dairy processors this year caused prices to skyrocket.
“Processors are now all scrambling to try and secure the milk and have to pay a hefty price,” he said.
‘A very emotional thing’
Ben Govett, who milks cows at Dingee in northern Victoria said it was a wonderful change from the dark days of 2016, when he was part of a packed town hall protest meeting.
“For a number of years most of us have openly admitted that we did it just for the love of cows and the love of farming – there’s no financial gain in that,” he said.
“I struggle, like every other dairy farmer, to pay the bills every month.
“There’s a lot of stress, and mental health issues that come with it.”
He said rising supermarket prices had lifted morale in his small rural community.
“It makes everyone feel a little better,” he said.
“For most of us it’s a very emotional thing, when you work so hard and your product is not appreciated.
He said he understood that the family was struggling to make ends meet.
But he said the cost of their farms had also soared and he hoped consumers would know they were getting “a safe and very high quality product”.
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