‘Any support is better than no support’: Dairy farmer defends $1-a-litre milk

Frank Chung
MAY 26, 2016
news.com.au
“WHO the f*** are you to judge me?”
After copping abuse from a random stranger in her local Woolworths for buying private-label milk, Townsville grandmother Nadine was fed up.
The 51-year-old, who looks after her five grandchildren and works at the local newsagent, told Kidspot she was accosted by the woman as she was rushing from work to school pick-up this week.
“It’s people like you that are contributing to the downfall of the local farmers — you and your $2 milk,” the stranger said.
Nadine hit back. “You don’t know my circumstances! I support local businesses where I can,” she told the woman.
“I buy my papers and mags from a newsagency when I can afford it and I buy bread from the local bakery. Who the f*** are you to judge me?”
Nadine’s story highlights the increasingly bitter nature of the milk wars.
The recent collapse in global milk prices has put renewed pressure on the local dairy industry and once again dragged the contentious issue of $1-a-litre milk into the spotlight.
On Facebook, however, one farmer has spoken up in defence of Nadine.
“As a dairy farmer, thank you for your support in a very hard time in dairy farming. It really means a lot,” Kellie Burns wrote on Kidspot’s Facebook page.
“Of course us (dairy farmers) aren’t the only people facing tough times. You do what you need to do and if that means you need to buy $1 then please do. Don’t be ashamed by it. No one knows your situation, it takes a very rude person to pipe up to a stranger and dictate to them what they should be buying.
“Any support is better than no support. For that I say thank you xx”
Ms Burns comment has been ‘liked’ nearly 1500 times — not quite going viral, but clearly resonating with some consumers.
While it’s easy to smash the big supermarkets over $1 milk, the real problem is much more complicated. For one thing, home brand milk sold at Coles and Woolworths only makes up about 6.5 per cent of domestic production — the vast majority is exported, either fresh or as milk solids.
The global price of whole milk powder has collapsed by nearly 60 per cent from its peak three years ago. In April 2013, whole milk powder was selling for $US5245 per tonne. Today it’s sitting at $US2252.
That largely happened for two reasons.
In August 2014, Russia announced a full trade embargo on western agricultural imports, including milk and dairy products, in retaliation for sanctions related to the Ukraine conflict.
While the direct impact on Australia was large — before the ban we exported more than 600,000 tonnes of dairy products to Russia — the bigger problem for local producers was the resulting oversupply.
That oversupply was rapidly worsened by the second major factor, when the European Union removed quotas on milk production at the end of March last year. The quotas, which had been in place since 1984, were lifted so EU dairy businesses could compete with international rivals in Asia and Africa.
The milk price collapse caused dairy co-op Murray Goulburn to slash its farmgate price from $5.60 a kilo to between $4.75 and $5 a kilo, after earlier promising as high as $6.
New Zealand dairy giant Fonterra then followed suit a few weeks later, cutting its price to $1.91 a kilo for the next two months in a bid to bring its average price over the year to $5.
“What we are doing is drive every cent of money which we can out of Australia back to New Zealand shareholders,” Fonterra CEO Theo Spierings told The Weekly Times last week.
For many of the farmers, that was well below the cost of production, sparking fears one fifth of Australia’s 6000 dairy farmers could go broke.
Worse still, Murray Goulburn and Fonterra caused outrage when they backdated the price cuts to July, demanding the farmers repay “overpayment debts” averaging $120,000.
The Australian Competition and Consumer Commission is currently investigating Murray Goulburn over allegations it misled investors about dairy sales and milk prices.
So where does that leave $1 milk? Well, Agriculture Minister Barnaby Joyce has warned unless the supermarkets axe $1-a-litre milk, a re-elected Coalition government would force them to raise their prices, The Australian reported.
“Retailers need to understand the momentum is there nationally for farmers to get a fairer deal, $1-litre milk that is cheaper than bottled water is not fair,” Mr Joyce said. “It is seen now by consumers as a bad thing that rips off farmers. It is affecting [the supermarkets’] good corporate names, so they should change it.
“Retailers don’t want the government to jump on them, but we will if they don’t do anything.”
The supermarkets, for their part, claim the current crisis has nothing to do with $1 milk. Both Coles and Woolworths purchase processed milk from dairy producers, which decide what price to pay farmers.
Just as Coles and Woolworths don’t tell Sanitarium* what price to pay farmers for wheat to make Weet-Bix, they don’t determine the farmgate price of milk. They say the cheap milk hasn’t led to lower prices paid to farmers.
In 2011, at the start of the milk wars, the ACCC investigated this issue and found that overall, Coles and Woolworths were wearing the cost of discounting in lower profit margins.
While it found that “some processors pay some farmers a lower farm gate price for milk sold as supermarket house brand milk”, overall “most milk processors pay the same farm gate price to dairy farmers irrespective of whether it is intended to be sold as branded or house brand milk”.
News.com.au contacted the ACCC to ask whether it still holds this view, but was referred back to the 2011 statement.
In a statement, a Coles spokesman said: “Processors set the price that farmers are paid, not Coles — our Coles Brand milk only accounts for about three per cent of Australian dairy production.”
A Woolworths spokeswoman said: “In total, just 3.5 per cent of the raw milk produced in Australia goes into Woolworths own and exclusive brand milk products.
“We purchase Select milk from processors, not direct from farmers, and so have no control over farm gate prices. We have recently put in place long-term contracts to offer farmers and processors certainty to invest in their businesses.”
However, Victorian dairy farmer Jessa Fleming told news.com.au last week the big problem with cheap milk was it sent the wrong message to consumers.
“I can’t see how cheap milk with very little profit has had any benefit to the industry,” she said. “It’s a product that needs to be valued. We need to tell consumers that it actually costs quite a lot to make.”
Ms Fleming did draw a distinction between the export market and the debate over cheap milk. “The way Murray Goulburn managed it is shocking,” she said. “But for the domestic market, people need to pay more for their dairy. It’s simple.”
She said a “fair price” for milk would “depend on how much profit the supermarkets are willing to [forgo] and pass on to farmers”.
“Victoria’s cost of production is different to NSW, and that’s different to Queensland,” she said.
“It’s really got to be worked out at a factory level. But basically, look at the profits that Coles and Woolies make, and look at the profits that dairy farmers make.
“There are farms closing, suicides — it has to change.”