Retail giants milking farmers

By Nick Hartgerink
Updated November 5 2012 - 11:49pm, first published February 14 2011 - 10:56am

One of the saddest commentaries in the present supermarket milk price war came from an angry dairy farmer, who said he wished he could remove the white colour from his milk and sell it as water. Then he might be able to get a decent return for his product.Instead, he has to stand helplessly, watching the major supermarkets sell his healthy, nutritious milk for $1 a litre – less than half the cost of a 600ml bottle of water in the same shops.Doesn’t make sense, does it? Coles slashed the price of its milk in January in a move that farmers claim will cost the supermarket chain around $30million – which consumers will undoubtedly pay for in other ways.Obviously Coles was looking for an advantage over its competitors, but it was short-lived. Predictably, major rival Woolworths quickly followed Coles’ lead, and Franklins and Aldi copied the two bigger chains.Now they’re back to square one, with no company having a price advantage. So why don’t they just end the game and go back to a fair price? Unfortunately this price war will very likely have a devastating impact on the long-term viability of the Australian dairy industry if it doesn’t end soon. Wherever the smart marketing geniuses at Coles who dreamed up the milk price war grew up, it’s a safe bet it wasn’t in a dairying community like the southern Illawarra. If they had, they’d know that dairying is a tough, unrelenting form of farming, and a very hard way to make a living.There is simply no respite from the 365-day-a-year grind of milking a herd of dairy cows and keeping them well fed and watered.And these hard-working farmers watch helpless as their industry, their herds and products are devalued by a futile price war.Not surprisingly, this has become an issue in federal parliament (hasn’t everything these days?).Independent and Coalition MPs say they are concerned at the implications for struggling farmers, with Opposition members calling on the Australian Competition and Consumer Commission to step in. A Senate committee will examine the milk price war. Good on them.Federal Agriculture Minister Joe Ludwig, on the other hand, seems blithely oblivious to the bleeding obvious. Late last week he claimed the cheaper milk was not necessarily coming at the farmers’ expense because supermarket chains have pledged to keep paying farmers the same rates.‘‘I’ve got assurances that I’ve received from Coles, specifically from the merchandising director,’’ he said. ‘‘It’s worth just quoting it: ‘Coles is not reducing its prices to its milk processor, so this move will not impact them or the dairy farmers who supply them’.‘‘Lower milk prices should not be reflected in a lower farm price - and of course I’ve got assurances that I’ve received from Coles.’’Australian farmers know from bitter experience that the big chains don’t have their interests at heart.If Senator Ludwig believes that slashing the retail price for a product by more than half is not to the long-term detriment of the producer, than he probably also believes that fairies live at the bottom of his garden.It’s enough to make you choke on your morning bowl of cornflakes – with ice-cold fresh milk, of course.Nick Hartgerink is a former Mercury editor who now runs his own media consultancy.

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