National Foods raises milk price but farmers label it a “stunt”

Posted by Daniel Palmer on 12th October 2009

National Foods appears a long way from appeasing Tasmanian farmers after a price increase was not particularly well received.

National Foods wrote to its Tasmanian farmers to announce a 1.1 cent per litre increase in the contract price for milk last week, a move they said was “in line with recent market movement”. However, Tasmanian farmers, who maintain that they are not getting a fair deal, have started an advertising campaign to counter the one pursued by the dairy manufacturer.

The dairy sector has been one of the hardest hit in the past twelve months as the global financial crisis helped force demand and prices down swiftly from record highs. Dairy prices have now stabilised but remain below the cost of production for many Australian farmers.

In Tasmania, concerns have been raised that fewer competitors in the market may be leading to prices below that in the rest of Australia, with a Senate inquiry set up last month to look into the issue.

National Foods said the price rise was in line with the recent upward movement from fellow dairy group Fonterra and they are planning to meet with representatives from the Tasmanian Collective Bargaining Group sometime this week to discuss the new contracts.

Managing Director and CEO Ashley Waugh said that while the deadline for farmers to sign contracts expired on 30 September 2009, the contract offer will remain on the table while the company was engaged in discussions with the Collective Bargaining Group.

“We are genuine in our efforts to ensure that we reward our farmers for their commitment to National Foods and we will continue to closely monitor commodity price movements and adjust pricing accordingly,” he said. “Our minimum price guarantee means we will be paying a typical farm, across the year, at least three cents per litre more than Fonterra, the major milk buyer in the state. This recognises National Foods’ requirement for a flat supply of milk across the year and the higher costs involved for farmers and equates to an additional $30,000 a year for a farmer producing one million litres of milk.”

Mr Waugh added that he was disappointed at calls for product boycotts.

“Boycotting our dairy products will actually hurt farmers because we pay farmers more for milk than our major competitors,” Mr Waugh maintained. “It is in all of our interests to have a sustainable dairy industry in Tasmania and we welcome the opportunity to work with other industry stakeholders to help achieve this.”

Despite the price hike, the dairy industry’s Collective Bargaining Group is likely to launch an advertising campaign against the dairy firm.

“It’s just a publicity stunt,” a spokesman for the Collective Bargaining Group, Phil Beattie, told the ABC. “Fonterra have stepped up now and so National Foods have stepped up at the same time, 1.1c a litre, which they would have done in January anyway.”