Dollar milk has more of a psychological, than financial, effect on dairyfarmers, a Senate inquiry has been told.
Both Bega Cheese chairman Barry Irvin and United Dairyfarmers of Victoria (UDV) president Adam Jenkins told the Senate dairy industry inquiry, sales of dollar milk did not have a significant impact on the price paid to suppliers.
But both said dollar milk devalued the work of farmers.
“I have spent my life, trying to get respect for dairy farmers,” Mr Irvin said.
Dollar milk affected confidence, by devaluing dairy.
“It’s not the driver (of lower farmgate prices) but it does affect how people think,” he said.
Mr Jenkins said dollar milk, in itself, was not the problem cast doubt in farmers’ minds about the hard work they did.
“If it is used a loss leader, it’s not quite right,” Mr Jenkins said.
“We do have families who can only afford dollar milk, so we have to respect that too, but overwhelming we support branded milk.”
South Australian independent Senator Nick Xenophon asked how milk could be sold at virtually the same price it was three decades ago.
“How can that be fair to farmers?” Senator Xenophon said.
“Do you consider the $1 a litre milk, unleashed on the market on Australia Day 2011, by Coles and followed by others, has impacted overall on the price dairy farmers receive for their milk ?”
Mr Jenkins agreed, but said it was not just on drinking milk, which made up only six per cent of Victoria’s milk pool.
Dollar milk, or the discounted home brand product, made up only one and a half per cent of production.
“I am not talking about just the drinking milk, it has to some extent devalued the dairy cabinet.”
He denied an assertion, by Senator Xenophon, that the UDV was resigned to accepting dollar a litre milk.
“We have never said that, we have always fundamentally said we want to get rid of dollar a litre milk,” Mr Jenkins said.
Senator Xenophon asked if a levy should be placed on milk, whether dollar milk should be outlawed, competition laws strengthened, or stronger predatory pricing tests applied.
“We need to extensively research that, but we put faith in the elected members of Parliament, to look over that on our behalf,” Mr Jenkins said.
“At the same time, we have an ACCC inquiry, which is now going to unpack, for the first time in the history of the dairy industry, all the margins along the supply chain.
“We place a lot of importance on that, where are those margins sitting, and where have they gone ?”
He told the inquiry the voluntary Code of Conduct, being drawn up between processors and suppliers, was nearing completion.
“We are not far from delivering it,” he told the inquiry.
But he said the industry also relied on regulatory bodies, such as the ACCC and ASIC, to “actually remove the people who made the decisions last year, which hit the whole supply base.”
The small business unfair contract legislation, enacted last November, would have gone a long way to help the UDV advocate the price cuts were not right.
Mr Jenkins said transparency, around contracts, was also required.
He said investigations, by the UDV, had uncovered the complexity of some of the milk price contracts.
“We believe it’s not so much secrecy, but it is getting very complex - we came up with 30-50 components of a milk price structure, that is unbelievable for an average family farmer to go through at the start of the year, to sit down and find out what makes up your milk price.”
