Littleproud flags milk market reform after caning supermarket drought stunts

Mr Littleproud is looking at how to revamp rules around supermarket contracts with processors, with the aim of strengthening market pricing options for processors and farmers.

Reform proposal details are likely to be released by February and are expected to receive sympathetic backing from federal cabinet.

"The fact is the milk market needs real reform. It's not working,” he said.

Processors were intimidated by the bargaining strength of retailers, while farmers had few bargaining options with anybody in the supply chain.

His move, in consultation with key dairy sector players, follows recent agreement for a mandatory code of conduct between producers and dairy processors.

Mr Littleproud said the milk market was clearly broken and the big supermarkets could no longer “wash their hands and claim the fact farmers are going broke is nothing to do with them”.

“I've already begun work on a mandatory code of conduct for the sector since dairy farmer groups called for it, but much more reform is needed.

“Farmers say the mandatory code for processors and farmers will be a good thing, but supermarkets need oversight too.

“That makes sense to me.”

Australian Dairy Farmers chief executive officer, David Inall, said Mr Littleproud had amplified farmer concerns and public sympathy this week, particularly with his stinging rebuke of Coles’ when he branded the supermarket’s drought help milk price policy as “half-baked” and “a stunt”.

Mr Littleproud became the latest to join a growing chorus of critics blasting Coles’ 10 cents a litre milk levy on three-litre bottled house brand milk, saying it was a farce hastily announced after rival Woolworths launched its own special “drought milk” range to raise 10c/litre for its drought-whacked milk suppliers.

German-owned discount retailer Aldi came in for even harsher commentary from the minister for selling “very cheap milk” and doing “bugger all” to help the industry or participate in any type of dairy reform.

“The big German should take a running jump if they can’t be bothered to support Australian dairy farmers,” Mr Littleproud said.

Aldi responded saying it did not support short term levies which may artificially alter market dynamics, but actually welcomed “government-led industry reform”.

“The health and viability of the dairy industry is a conversation worth of national attention,” a spokesman said.

“When Mr Littleproud first proposed a government-led initiative to support the dairy industry, we signalled our support, should it be implemented.

“Our position remains the same.”

But Victorian Nationals MP, Andrew Broad, believed the community was growing cynical about supermarket promises to help farmers when in reality they were doing little, or even making their plight worse with current pricing policies.

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ADF’s Mr Inall said there was no question about the deep degree of distress among dairy farmers towards retailers and their milk pricing attitudes, especially $1/litre house brand milk.

“This topic is also attracting a lot of public interest and considerable political attention,” he said.

While farmers accepted retailers wanted to service their customers, the drought had highlighted extreme production costs which milk producers paid while milk returns had basically flatlined since Coles undermined retail prices in 2011 by introducing $1/litre milk.

“Dollar milk ushered in a race to the bottom mindset – retailers need to see the big picture here,” Mr Inall said.

“To be a successful and prosperous industry retailers must let farmers share in the returns they deserve.”

Unlike beef or grain farmers, milk producers could not hold product off the market if prices were poor and must keep milking when seasonal conditions were tough.

“We urgently need a shift in retail pricing that reflects reality and adds value to the entire dairy cabinet, including phasing out $1/litre milk and cheap cheese,” he said.

NSW Farmers Association argued supermarket drought levies were marketing ploys designed to keep extreme dairy discounting alive even longer.

Dairy committee chairwoman, Erika Chesworth, said producers were at breaking point and Coles’ drought fund had delivered more anger and anxiety than help.

“For years retailers’ actions have eroded value from the NSW dairy industry and it’s offensive farmers now need to apply to access these funds,” she said.

“Coles’ drought program is not genuine, it only applies to a limited range of products and farmers must supply sensitive information such as individual milk statements to access any funds.”

Queensland Dairyfarmers Organisation said consumers may buy into these “ridiculous PR stunts” thinking they were doing the right thing, but Coles and Woolworths were actually capitalising on the drought for their own gain.

“The drought levies apply only to their private labels,” said executive officer Eric Danzi.

“It’s a sign of their corporate greed that the price increase initiative across all sizes and brands which we’re campaigning for to help struggling farmers should be manipulated to grow retailers’ own market share.

“Truly, they should be ashamed.”

Managing director of Coles’ parent company, Wesfarmers, Rob Scott, was disappointed by Mr Littleproud’s spray, and felt he and other critics did not fully appreciate the retailer’s intentions.

“Coles has done an enormous amount to support our farmers,” he said referring to $12 million-plus in drought support already paid by the supermarket,” he said.

“Customers also have the choice of what milk to buy, but many are very price-focused and trying to make their household budgets go further.”

Coles claimed a 10c/litre levy on all fresh milk would cost Australian consumers $250m annually.

“That cost would fall disproportionately on the 40 per cent of households with only $150 a week to spend on their weekly grocery shop,” a Coles spokesman said.

Coles was receiving “a steady stream of applications” from dairy farmers for a share of its contentious 10c/litre levy on house brand milk.

Aldi said it was working directly with suppliers to ease drought cost pressures, accepting farmgate price increases which had not been passed on to customers.

“Without a transparent, auditable and equitable process for funds collection and distribution, we believe it would be irresponsible of Aldi to tax consumers on the purchase of milk.”