Supermarkets reject Littleproud dairy claims

Leading supermarkets reject claims they're to blame for dairy woes

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CLAIMS REJECTED: Woolworths is among the supermarkets that have rejected claims they are engaging in tokenism, when it comes to supporting the dairy industry.

CLAIMS REJECTED: Woolworths is among the supermarkets that have rejected claims they are engaging in tokenism, when it comes to supporting the dairy industry.

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Supermarkets deny claims they are causing dairy pain.

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Australian supermarkets have hit back at claims, by federal Agriculture Minister David Littleproud, they are responsible for much of the misery in the dairy industry.

Speaking on a Rural Press Club webinar, Mr Littleproud said supermarkets had devalued the industry, by bringing in dollar-a-litre milk.

"They are the perpetrators of much of the misery in the dairy industry because they are the ones that devalued the industry by bringing in a dollar a litre milk," Mr Littleproud said.

"They have a role to play and had a responsibility to work with us, as they did 12 months ago, to actually engage with the industry to understand exactly what it takes to produce milk in this country," Mr Littleproud said.

"And the disappointing thing is that, effectively, the supermarkets have tried to put tokenistic gimmicks out there to try and fool metropolitan Australians that they're all caring, they're all loving of dairy farmers, when in fact they have devalued the industry, and they don't want to be part of the solution."

Mr Littleproud did acknowledge Coles had come out with direct prices for producers which where higher than many, showing there were some competitive forces, being brought back into play.

"But I don't know whether that's necessarily got us to the level playing field that we're looking for yet," Mr Littleproud said.

"That's why I'll be engaging with the Australian Competition and Consumer Commission and looking at some complementary measures, and making sure the supermarkets are part of that as well because they have a role to play in this as well."

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But a Woolworths spokesperson said the company had been taking steps to support the dairy industry, while the federal government worked to deliver the evidence-based structural reform recommended by the ACCC

"Since September 2018, our levy has contributed around $50 million in relief to more than 450 Australian dairy farmers," the spokesperson said.

"With the extension, it's set to deliver another $30 million over the next 12 months.

"On top of the levy, we have also agreed to tens of millions in wholesale cost increases from milk processors across the dairy cabinet, in response to rising farmgate prices."

ACCC submission

The ACCC made a written submission to the Senate Inquiry in November last year.

The submission pointed out the ACCC understood and respected the concerns of many farmers, that retail prices of private label drinking milk products had a negative impact on farmgate milk prices.

Recognising these concerns, the ACCC Dairy Inquiry included an in-depth examination of the effects of retail pricing along the dairy supply chain.

"We analysed the correlation between movements in retail prices, farm gate milk prices, reduced production volumes and a subsequent increase in farm exits in response to lower profitability," the submission said.

"The ACCC concluded that the introduction of $1 per litre milk or reductions in other dairy retail prices did not have an observable direct impact on farm numbers, output or profitability.

"Rather, we found that movements in farmgate prices can be attributed to changing demand conditions within the export or domestic market and that almost all contracts for the supply of private label milk allow processors to pass-through movements in farm gate prices to supermarkets."

This meant processors did not have an incentive to reduce farmgate milk prices, as a result of the lower wholesale prices they received for private label milk, as the farmgate prices were passed through to the supermarkets.

Aldi Australia buying managing director Oliver Bongardt said the company had extended the collection of a 10 cents milk levy.

"The levy, which has been in place since March 2019, sees ALDI collecting and passing on in full, 10 cents per litre on all 2-litre and 3-litre fresh milk products sold," Mr Bongardt said.

"ALDI has already collected and passed on more than $11.7 million to Australian dairy farmers."

He said ALDI had decided to ensure it supported a strong and sustainable Australian dairy industry while it waited for systemic change.

"The findings and recommendations from the 2018 ACCC Dairy Inquiry were clear, and as we wait for them to be rolled out, we are happy to support the government and dairy industry more generally on short term measures that lead to the ongoing sustainability of the industry," Mr Bongardt said.

"ALDI supports the work of Mr Littleproud as he looks to address issues raised within parts of Australia's dairy industry," he said.

"We are hopeful that we will see changes implemented by the government shortly, which will remove the requirement for a levy and allow regular market dynamics to return."

A Coles spokesman said the company was committed to ensuring dairy farmers received a fair price at the farmgate and securing a sustainable future for the Australian dairy industry.

"Last year we introduced a direct contract model for Coles Brand milk in Victoria and central and southern NSW, which allows us to deal directly with farmers rather than through a processor," the spokesman said.

"We consider our offer provides certainty of income for farmers through fixed pricing and a choice of one, two or three-year agreements.

"The arrangement is working well, and we're now rolling it out across South Australia and Western Australia."

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