Western Australian farmers have met with Wesfarmers boss Richard Goyder to discuss the impact of the milk price wars on production and try to find a solution.
The farmers want fairer pricing strategies from the group, which includes Coles, and last week the WA Farmers Federation passed a motion to boycott Wesfarmers and its subsidiaries.
The WA Farmers Dairy Council say the “predatory pricing” by the major supermarkets have devalued the industry.
"Unsustainable" pricing
Australian farmers have been fighting the major supermarkets over the price wars since Coles slashed the price of its private label milk to $1 a litre in January last year.
Woolworths quickly followed suit, and despite a Senate Inquiry and an investigation by the Australian Competition and Consumer Commission, the supermarkets were allowed to keep trading at the reduced price, which the industry has slammed as “unsustainable.”
But president of the Australian Dairy Farmers Association, Chris Griffin, told Food Magazine earlier this year that the financial pressures placed on farmers through the price wars has led to many leaving the industry.
“We know there’s been at least 30 leave the industry in Queensland alone, and the majority are sighting the uncertainty of milk prices as the reason,” he said.
Unsurprisingly, dairy farming was rated the second worst job in the world last week, based on physical demands, work environment, income, stress and hiring outlook.
Many WA farmers wanted to support the proposed boycott immediately, but the motion was passed on to the executives of the association for assessment.
Managing director of Wesfarmers, Goyder, met with WA Farmers president Dale Park and senior vice president Tony York this week to discuss some of the issues, including the impact of the pricing on the industry, which it says has lost it $25 million.
Who absorbs the price cut?
Coles has continually denied that its low-priced milk is impacting the dairy industry, claiming it is absorbing the costs, but those in the industry know that while that may be the case for now, in the long run producers will be taking the financial hit more than they already are.
“What it comes down to, according to the supermarkets, is that it comes down the them looking after us as consumers by cutting prices, but it comes at the expense of quality and also, they’re not asking consumers if they’re OK with this, they’re just deciding for us,” Australian Manufacturing Workers’ Union (AMWU) food and confectionary secretary, Jennifer Dowell, told Food Magazine earlier this year.
“Invariably they say it is not absorbed by the grower or the manufacturer when they cut the prices but in the end it always does.”
Following the intense debate about the cost cutting by Coles and Woolworths and the ruling that $1 per litre was acceptable Food Magazine asked Griffin if the chances of the big two supermarkets increasing the price of milk to help with the increase in farmers’ costs, including the carbon tax, would most likely be slim.
“That’s a question for Coles,” he said.
“We believe the tactic all along by Coles was just to get people through its doors, and since dairy products are in 97 per cent of consumers homes, it’s a draw card they’ve used.
“It’s always at the back end of the supermarket, so you have to walk through all the other products and displays to get to it, so it is simply a marketing ploy they’ve implemented at the expense of the dairy industry.”
When contacted by Food Magazine to find out if they would consider absorbing the cost increase, Jim Cooper from Coles said "we are not speculating about the potential impact the carbon tax will have on retail pricing."
Fear campaign
While the meetings between farmers and the major supermarkets are a step in the right direction, hopefully it will pave the way for other suppliers to follow suit and start talking about the impact of the price wars, because up until now the Senate Inquiry into the power of Coles and Woolworths has been met with fear from producers to afraid to criticise the supermarkets.
“WA Farmers wants to work with all food retailers to develop a supply model which ensures locally available product is their preferred source, pricing structures are sustainable and to develop a program which highlights to consumers the source of their product,” Park said.
More meetings are planned between the executives in coming weeks.
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