Supermarket milk contracts to be scrutinised

Posted by Daniel Palmer on 25th September 2009

The Senate Economics Committee is set to investigate contracts between the major supermarkets and dairy group National Foods as part of their analysis of pricing in the dairy industry.

Earlier this month the Committee was asked to determine whether farmers were being hard done by in response to uproar following price cuts – largely focusing on price reductions by National Foods in Tasmania.

Committee member, Tasmanian Senator Richard Colbeck, has told the ABC that the investigation will now look into contracts reportedly signed three years ago making National Foods the major supplier to supermarket chains Coles and Woolworths.

“We think it may be part of the reason that current circumstances are occurring with the relationship between dairy companies and farmers,” he said. “We really need to find out from those particular players what the basis of that decision was, and we’re also very interested in looking at the consolidation of the market that that decision may have brought about.”

National Foods spokesman Geoff Lynch maintained that the firm saw the inquiry as an opportunity to highlight the facts, which they believe are being distorted.

“The important thing for us is that misinformation is taken out of the equation,” he said.

Meanwhile, David Llewellyn, Minister for Primary Industries and Water in Tasmania, yesterday met with the Managing Director of National Foods regarding milk prices and other issues confronting Tasmanian dairy farmers.

The discussions were “robust” in relation to milk pricing, he reported.

“The Government agreed to provide National Foods with additional data regarding production costs in Tasmania,” Mr Llewellyn added. “National Foods agreed to assess the data along with the recent increase in milk price by Fonterra over the next week.”

“National Foods will respond to Government following their assessments.”