Woolworths’ announcement that it is scrapping its $1 a litre milk campaign and passing on 10 cents a litre to dairy farmer suppliers may be a green shoot in the current dairy landscape.
While the impact on Victorian and southern NSW dairy farmers will be relatively small, the recognition of the impact on the industry since the introduction of $1 a litre milk in 2011, was welcomed.
Industry leaders said the announcement was a small step to a big problem.
The announcement comes as the latest data from Dairy Australia shows a massive drop of 22.6 per cent in milk production from Northern Victoria for December 2018.
That came as Western and Eastern Victoria fell by 2.2 and 2.5pc respectively.
Data showed Victoria’s production for December was 8.8pc lower and 6.1pc down year-to-date.
In southern NSW (Riverina), milk production also slumped with production for December down by 15.6pc on a state figure of 11pc down.
Dairy Australia senior industry analyst John Droppert said the production trends were similar to November’s figures with Northern Victoria all the way to Queensland hardest hit.
The challenges of high water and feed costs were particularly severe and there were fewer options for dairy farmers.
Mr Droppert said parts of Western Victoria and areas in Gippsland were “doing pretty well” but were still a bit behind the previous year.
Tasmania’s growth, up 5pc for December and 4.3pc year-to-date, were on the back of record increases last year.
Anecdotal evidence showed that the number of dairy farmers exiting the industry was higher than normal and culling rates were well up.
Mr Droppert said cow numbers were critical and these were expected to be down 5pc by the end of the season.
United Dairyfarmers of Victoria president Paul Mumford said the Woolworths announcement was a “small step” in the right direction.
“There is a long way to go,” he said.
Mr Mumford said milk production figures for Northern Victoria in particular for December were “horrific” but not unexpected.
There was still worse to come as more farms and more cows were being sold.
There was a fundamental shift in agriculture occurring in Victoria about where milk was being produced, he said.
Water allocations were exhausted and farm businesses were coming to a crunch time to guarantee their businesses into the new season.
“Rest assured the whole industry is working tirelessly behind the scenes to find solutions for dairy farmers,” he said.
“We are working to remove the discounting on the whole dairy cabinet and improving the value of dairy.
“We are calling on Coles and Aldi to follow the lead of Woolworths ans scrap their own schemes,” he said.
Related reading:
Woolies breaks ranks on cheap milk, lifting price to $1.10/L
The first part was to fix the problems faced by industry and then find options for farmers to manage their businesses and futures.
“We need dairy farmers to stay in the industry. We are on the cusp of a better future than what it looked like six months ago,” he said.
Mr Mumford, who farms near Yarram, said he understood what dairy farmers were experiencing.
“We are in one of the worst areas of the state and I haven’t made a profit in the past five years,” he said.
Mr Mumford said an area being focused on was cost structure within businesses as well as issues such as the dairy mandatory code of conduct.
He said farmers should be confident they “are not alone” and that there was co-operation at every level to find solutions.
“We are working to help people make decisions about their businesses and how to manage those decisions over a whole range of options,” he said.