August 15, 2011

New South Wales' Parmalat rivals Dairy Farmers Milk Co-operative for suppliers

Up to 30% of New South Wales' Dairy Farmers Milk Co-operative's 320 suppliers could be ripe for the picking by rival Parmalat by paying a cheaper farmgate price.

But the co-operative has warned that if Parmalat pays less than the current highest farmgate price - about US$0.51/litre - for "milk that ends up on supermarket shelves", it could damage the state's entire dairy industry.

Lion Nathan, formerly National Foods, lost the contract to supply house-brand milk to supermarket giant Woolworths this year.

Much of this milk was sourced by Lion Nathan from DFMC suppliers, so this contract loss has been expected to wipe about 80 million litres from the volume of tier-one milk - the milk which attracts the highest farmgate price - for NSW DFMC suppliers.

A larger percentage of milk from DFMC NSW suppliers would be paid at a lower tier-two price.

DFMC director John Stanham said it appeared Parmalat had chosen to source milk for the Woolworths contract directly from farmers because it would cost less than purchasing it through Lion Nathan.

He admitted that if Parmalat took supply from DFMC it could dilute the tier-two volume in NSW, but he said paying a lower price could hurt farmers and consumers.

"Less tier-two milk in the DFMC price for the short term will actually increase the average price," he said.

NSW consultant Dr Neil Moss from livestock consultant SBScibus said farmers looking at moving milk processors needed to evaluate their options and closely scrutinise milk prices, including regional and volume incentives and take into account when DFMC's tier-two milk pricing "kicked-in" for their business.