May 11, 2011

 

Australia's dairy industry embraces set milk pricing

 

A plea by independent Senator Nick Xenophon for the Australian competition watchdog to establish a least possible farm gate price for milk has been embraced by the Australian dairy industry.

 

Xenophon made the call in comments attached to an interim report of the parliamentary committee examining milk prices in the wake of the Coles AUD1/litre (US$1.08) milk price war.

 

Xenophon said he believed a minimum price was needed to protect farmers given the disparity of the bargaining powers between the dairy farmers and processors on the one hand, and the major supermarket chains on the other.

 

He wanted the Australian Competition and Consumer Commission (ACCC) to set a floor price for dairy farmers as an urgent interim measure to protect dairy farmers.

Xenophon's call has the backing of Liberal Senator Bill Heffernan, Nationals Senator John Williams and Greens Senator Christine Milne, none of whom sit with Xenophon on the milk committee.
 

Tuncester dairy farmer Paul Weir said he would be keen to see a floor price for milk, depending on how the price was set.

 

Weir said the price needs to be able to move up and down to account for changes in costs to dairy farmers, such as higher feed costs resulting from drought or flood.

 

Under the existing system, farmers were out-gunned by supermarket giants Coles and Woolworths.

 

Weir said the supermarkets wanted to sell milk cheaply to bring customers into their stores and were able to pressure dairy farmers to sell their produce quickly to keep it from spoiling.

 

The move would send the dairy industry part of the way back towards regulation. Before milk was deregulated, the government set the price at the farm gate, the price paid to processors, the price paid to milkos, and the price paid to retailers.

 

Under Xenophon's plan, the ACCC would be the body setting the price and then only a minimum price to be paid to dairy farmers at the farm gate, with the rest of the industry to remain deregulated.

 

Norco chief executive Greg Macnamara said Norco would welcome anything that helped farmers.