Woolworths says it is taking steps to end the milk price war and deliver fairer prices to dairy farmers

John McCarthy
March 21, 2013
The Courier-Mail

WOOLWORTHS has admitted that $1-a-litre milk is unsustainable and has taken steps to deliver fairer prices to dairy farmers.

The food giant is set to trial a new scheme which cuts processors out of the chain, leaving it to negotiate directly with farmers on prices.

The processing would be done for Woolworths under contract.

But Queensland Dairyfarmers’ Organisation chief executive officer Adrian Peake was sceptical and said the proposal needed more analysis.
“If Woolworths is prepared to pay a sustainable price to dairy farmers that is a major step forward,” Mr Peake said.

But he said if Woolworths adopted the same model as Tesco in the UK, it required additional supply conditions on dairy farmers which added to their cost of operation.

“Fresh milk takes a lot of work to produce on farm, process and freight, and $1 milk at retail simply is nowhere near a sustainable price that affords proper value to all in the supply chain,” Mr Peake said.

“If the supermarkets are truly concerned about farmers . . . they could stop the milk war.

“If that won’t happen, we need an independent umpire and a mandatory code of conduct and the ACCC to crack down on loss-leader ruthless market tactics.”

A Woolworths spokeswoman said the company always believed $1 a litre was not sustainable.

“As a result, we are looking at trialling alternatively sourced milk products, direct from dairy farmers, which deliver a higher price at the farm gate,” the spokeswoman said.

Woolworths is also considering a return to unhomogenised milk as a niche product that would be pitched at the older market and the nostalgia for cream layered milk.

The product could be part of a new Farmers’ Milk label the company was considering.