WA dairy farmers hurting thanks to $1 milk

Dairy farmers in WA are hesitant to sign on the dotted line of long-term contracts with milk processors, meaning the state could be facing its biggest shortfall in supply for 50 years.

Lion, Brownes and Harvey Fresh are all said to be offering three- to five-year arrangements, but farmers are hesitate to commit, worried that the current market conditions will hinder their return.

According to thewest.com.au, dairy industry consultant Steve Hossen, said farmers aren't seeing price rises, despite the current milk shortages, because of the $1 milk offering from Coles and Woolworths.

"Normally when any agricultural product is as scarce as this is – and milk is as scarce as it has ever been in WA – the price should go ballistic," he said.

"In this case it won't happen. Manufacturers are trying to constrain the size of price rise because they haven't got the ability to pass it on under $1-a-litre contacts with the supermarkets."

Thewest.com.au reports that milk production in WA fell by 16 percent to 338 million litres in the 10 years to 2012, and is marginally down on the same time last year, despite demand fuelled by population growth rising by an around 3.5 percent.

Some dairy farmers are prepared to dig in their heels, with about 30 demanding better prices for signing contracts and others on the south coast who've demanded processors drop transport changes from up to 7c a litre to zero.


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