Household budget squeezed as Coles raises the price of home-brand milk
One of Australia’s largest supermarkets has announced a huge price hike for its branded milk which is sure to put more pressure on family budgets.
Key points:
- The price of Coles home-brand milk will increase by 25 cents per liter for 1L and 2L bottles
- It said rising procurement, transportation and packaging costs were behind the increase
- He also said that they pay farmers more for their milk
Coles said his own 1-liter fresh milk would jump 25 cents from $1.35 to $1.60 per liter while a 2-liter bottle would increase to $3.10 from $2.60.
It was the most substantial one-time increase since supermarkets introduced the controversial $1 per liter milk in 2011, which slashed retail prices of milk by a third.
Coles, Woolworths and Aldi all raised their supermarket milk prices by 10c per liter in December last year.
The increase was the first increase by a retailer in more than two years after the last three hiked prices by 10 cents in July 2019 after ending dollar milk earlier that year.
Coles said “rising procurement, transportation and packaging costs, including a substantial increase in farm-level prices paid to dairy farmers” had led to price increases.
Milk is sourced directly from dairy farmers and also through dairy cooperative Norco, which supplies Coles Brand milk in north NSW and south Queensland.
The increase comes after record prices paid to farmers by dairy processors for the new financial year, with farm gate values reaching $10 per liter for solid milk.
Income has gone down
Coles said the increase in retail prices was “in recognition of the higher costs dairy farmers face” and the price farmers have to pay.
“This includes the increase in farmgate prices paid by Coles this financial year, even for farmers who already have multi-year contracts,” the company said in a statement.
“Coles has been paying this higher price since July 1st.”
The latest inflation figures show a 4.3 percent increase in food prices for the year to March.
Inflation jumped to 5.1 percent in March in the previous 12 months, due to higher residential construction costs and fuel prices.
Today’s price increase comes as ASX-listed dairy processor Bega Cheese today issued a potential earnings downgrade to the stock exchange, citing a 30 percent increase in the amount paid to dairy farmers following strong competition from other dairies for milk.
Farmers ‘positive’
Although the increase is a blow to consumers, farmers are positive.
East Aus Milk vice president Graham Forbes said he welcomed the price hike but there was room for it to grow.
“I still think we need to raise basic milk prices to around $2 as in most countries around the world.”
Mr Forbes, who is a Gloucester-based dairy farmer on New South Wales’ Mid North Coast, said farmers had faced higher input prices, including for items such as diesel and fertilizer.
“This means that our profit margin is reduced,” he said.
“I think we were probably in a stronger position even last year … we are certainly chasing that inflation at the moment.”
He said flooding and wet weather also had an impact on farmers.
“I think milk on the north coast is now back more than 20 percent like last year, and last year we had flooding too,” he said.
“Production across the country is being squeezed, I think we’re going to see a June figure maybe over 10 per cent, that Australian production is going down in all the states.
“So there’s a shortage of milk there now and a huge demand for that milk.”
Coles price hike ‘inevitable’
Ben Geard, from Geard Family Farms in southern Tasmania is a supplier of Coles, and said a spike in Coles milk prices was “definitely going to happen”.
“The price of milk for farmers has gone up quite a bit this year, so maybe Coles and other processors will try to recoup their costs,” he said.
“It’s not great for customers even though milk has been underrated for quite a while when you compare it to some of the other staples – water, soft drinks and that sort of thing.
“We were on a dollar per liter there for some time and that ended almost two years ago.”
Mr Geard said “that’s a good thing”.
“$1.60 I still think that’s still pretty reasonable for a pint of milk,” he said.
“Not good this price has only gone up for 12 months.”
Mr Geard said prices need to remain competitive with other industries if dairy farmers are to survive in the industry.
He said it would cost quite a bit to produce a liter of milk, with fertilizer increased by 30-40 percent.
“We have to use a lot of fertilizer on the grass and this time of year we feel a lot of grain in dairy products to make sure we get milk during the winter,” he said.
“As good as the price is this year there’s bound to be a lot of payouts coming out as well.”
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