Milk wars kick Parmalat farmgate prices down

Posted by Nicole Eckersley on 16th June 2011

Queensland Dairy Farmers Peter Brown, Ross McInnes, and Ivan TeeseFloods, cyclones, and prolonged wet weather are expected to cut some 40 million litres from milk production in the seven months to June 2011 in the northern production region, with production for the first few months of 2011 being down by some 20 percent, Queensland dairy farmers heard today.

At the annual Situation and Outlook (S&O) breakfast – where industry body Dairy Australia presented its latest industry statistics – farmers and industry were told that the summer of disaster had taken a heavy toll on the industry.

Queensland Dairyfarmers’ Organisation President Brian Tessmann said that the S&O report confirmed that the retail milk war had sapped confidence from Queensland farmers and is already directly impacting the pay cheques of more than 180 dairy farmers.

The report summarised: “Deep discounting of fresh white milk products by major grocery retailers has stripped wholesale value from the milk category, commoditising a wider range of products. This is impacting farm gate returns for some producers and is threatening farmgate milk prices for the next season as supply contracts are due for renegotiation.”

Tessmann said that the “cruel irony” was that the underlying fundamentals should be cause for much more optimism from farmers.

“As we recovery from natural disaster, the seasonal conditions are sound. With a State Budget depicting Queensland in an ongoing boom, our growing population will need more and more fresh milk.

“Clearly there will be a thirsty demand for our milk. But farmers need to see real value at the retail end of the value chain so we can be sustainable. We are not getting those signals at the moment.”

Tessmann also confirmed that Parmalat suppliers had again seen a drop in their milk cheques as a direct result of the milk war.

“For the month of May, the portion of branded-milk sales for which farmers were rewarded has dropped to 76.08 percent, from 83.29 percent during the corresponding month last year.”

76.08% marks the pricing system’s lowest level since it was introduced in 2000. It means that farmers’ milk cheques have been more than $2400 lower for the same four months, February to May, than last year. Across this supply group the cumulative impact to the end of May is mounting to close to half a million dollars and is getting larger the longer retail milk price war continues.

“The impact of the retail milk war is real, and it is hurting farmers right now. The impacts occurring in Queensland are a clear example of the losses occurring to the supply chain right across the board,” Tessmann said.

“The retailers need to stop the price war now and return prices to sustainable levels and the Federal Government needs to act on the recommendations we have put forward, and to do this quickly.”

“Consumers wanting to support dairy farmers should buy branded milk such as Norco, Dairyfarmers, and Pauls.”