Woolworths and Coles are driving up milk prices and there could be more price increases to come due to an expected drop in domestic supply.
- Farmers get record prices for milk
- They say rock bottom prices have driven farmers out of the industry, leading to a surge in demand now
- Other factors are at play, including declining production from major overseas producers like New Zealand, the EU and the US.
But relieved dairy farmers say the supermarkets themselves caused the sudden price hike.
Earlier this week, Coles announced it would increase its private label milk by 25 cents, from $1.35 to $1.60 a litre.
Today Woolworths matched the increase, blaming higher supply chain costs, including payments to farmers.
“Farm gate prices paid to dairy farmers have increased significantly this season and as a result we are paying our branded suppliers more for milk,” a spokesperson said.
The spokesman said “processors – not retailers – set the farm gate price paid to dairy farmers” and supermarkets simply passed on this extra cost.
Aldi, which prides itself on offering fresh produce at reduced prices, also said it would follow rising milk prices.
“We are actively reviewing the retail price of our milk range to ensure that our prices reflect the additional costs that affect dairy farmers,” a spokeswoman said.
Supermarkets partly to blame, say farmers
A combination of global and local factors are driving the rise in the price of milk, including inflation and rising production costs.
Australian Dairy Farmers Association chairman Rick Gladigau said supermarkets were partly to blame for the sudden price hike.
In 2011, dairy farmers were shaken when supermarkets slashed milk prices by a third and launched the Coles-led $1-a-litre milk campaign.
Mr Gladigau said the industry warned at the time that the push would be disastrous.
Now, he says, “everything goes home to roost.”
“We have seen the exodus of farmers, now we see there is a shortage of milk in the country,” Mr Gladigau said.
The campaign was made worse by the financial troubles of former farmer-owned co-op Murray Goulburn in 2016, when it immediately and retrospectively slashed milk prices.
This resulted in farmers being paid less than the cost of production, triggering a national dairy crisis.
Since then, 1,510 dairy farms have left the industry and Australian milk production has increased from 9.5 billion liters in 2015-16 to 8.8 billion liters in 2020-21.
Domestic milk production is expected to decline by 250 million liters through June 2022 as production is hit by rising fertilizer and fuel costs, labor shortages and flooding.
Global production down
According to Dairy Australia’s latest outlook report, production is down in New Zealand, the European Union and the United States.
About a third of Australia’s milk is exported and there has been a 10% increase in global exports for the year ending January 2022 compared to last year.
“This was led by the greater China region, where imports jumped 18.5%,” Dairy Australia said in its May report.
All of these factors contributed to the record farm gate price supply for the new fiscal year.
Australia’s largest processors Fonterra, Saputo and Bega pay farmers an average of around $9.40 per kilogram for milk solids.
The smallest Victoria-based dairy company, Bulla, offered an unprecedented price of $10/kg for milk solids.
Mr Gladigau said frantic bidding by all dairy processors this year has led to sky-high prices.
“Processors are now scrambling to try and get milk and have to pay a substantial price,” he said.
“A very emotional thing”
Ben Govett, who milks cows in Dingee, northern Victoria, said it was an incredible turnaround from the dark days of 2016 when he was part of crowded protest meetings at town hall.
“For a number of years most of us openly admitted that we were only doing it for the love of cows and for the love of farming – there was no financial benefit to it,” he said. he declared.
“I was struggling, like all other dairy farmers, to pay my bills every month.
“There’s a lot of stress and the mental health issues that go with it.”
He said rising supermarket prices had boosted morale in his small rural community.
“It makes everyone feel a little better,” he said.
“For most of us, it’s a very emotional thing, when you work so hard and your product is not valued.
He said he understands families are struggling to cope with the cost of living.
But he said their farming costs had also skyrocketed and he hoped consumers knew they were getting a “safe and very high quality product”.