Rabobank to present global picture of milk discount wars

  • February 27, 2013
  • Sophie Langley

A report sourced from Rabobank will show that retail milk discounting and price pressures on dairy suppliers is a worldwide phenomenon and not just confined to Australia.

Rabobank senior analyst Michael Harvey told the Australian Broadcasting Corporation’s rural news service today that milk wars are already a major feature of supermarket food trading in the US, the UK and Europe.

He suggested that the problem might be worse for farmers in Australia because there is a more complex supply chain in the Australian dairy industry.

In other parts of the world, he said, supermarkets are dealing directly with farmers. “Generally, I think the farmers are a whole lot more comfortable with the process; they can actually negotiate a price directly with their major customer to market,” he told ABC rural news.

Meanwhile, Australian dairy farmers have holding meetings around the country to discuss how milk discounting is threatening the viability of dairy farm operations, and discussing possible solutions.

Collective bargaining and welfare support were some suggestions from a meeting of dairy farmers, held in Mt Gambier last week. South Australia has fewer than 300 dairy farms, but the crisis meeting was attended by 200 dairy farmers. Mt Gambier is located in the far south east pocket of South Australia and has a rich volcanic soil that is common to Victoria’s nearby Western District dairying region across the State border.

Numerous similar meetings have been held in Victoria’s dairy regions, including the Goulburn Valley and Gippsland. At one of these meetings in Victoria last week, dairy farmers discussed the risks and benefits of ‘loyalty payments’, where extra payment is offered following the milk supply season to discourage farmers from shopping around for the best price for their milk.

Recent statements from dairy industry body Australian Dairy Farmers have reiterated the problems with current prices for farmers and processors, saying that the milk price discounting by supermarkets has reduced farmers’ returns. Similar issues have affected farmers in Queensland, New South Wales and Western Australia, where returns have fallen by a further 3 to 4 per cent. Milk processors claim that they are facing a similar dilemma in supplying the Australian domestic market. Although the high Australian dollar has also impacted the value of exports for processors, other export opportunities are developing in Asian markets, particularly for products such as milk-based infant formulas and cheeses.


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