Struggling South Australian dairy farmers say they have been dealt another blow with the announcement of a multi-billion dollar deal between Coles and Victorian dairy brand Devondale.
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From July 2014, Victorian farmer co-operative Murray Goulburn, which owns the Devondale brand, has secured an exclusive 10-year deal with Coles supermarket to supply its daily pasteurised milk for its private label brands.
The deal, estimated to be worth $2 billion, will cover products in Victoria and New South Wales.
But the South Australian Dairy Farmers Association holds grave fears over what the deal will mean for the state’s remaining dairy farms, most of whom are not Devondale suppliers.
A thriving industry with 1700 farms in the 1980s, only 270 dairy farms remain today. Of those, 61 supply the Devondale brand, the South Australian Dairy Farmers Association says.
President David Basham held talks with Murray Goulburn on Wednesday.
“They made it clear they would have like to have been involved in SA but at this point in time we were not a contender, but they would have liked us on the agenda,” Mr Basham said.
He said while the new deal was not intended to create a battle between the two states, it could head in that direction.
Mr Basham, a dairy farmer from Mt Compass, an hour south of Adelaide on the Fleurieu Peninsula, said the deal resulted in the exclusion of a large percentage of the market for the next decade.
He worries the deal could push down the prices paid by other dairy processors.
Farmers ask, “Where’s the state government?”
The view at Graham Smart’s office at Mypolonga, north of Murray Bridge, takes in paddocks and his herd of 700 milking cows.
Mr Smart is adamant the Coles-Murray Goulburn deal will “ruin the dairy farming industry within SA”.
He attacked the state and federal governments’ past handouts to car manufacturing by the way of grants to General Holden Motors.
“The dairy industry employes just as many and they have their back turned on us,” he said.
He said the blow was further compounded by the lack of support shown by the state government and grave concerns over the decline of SA operated dairies.
“With Coles and Woolworths milk being down to a dollar, overseas powdered milk and skim has risen 40 per cent in the last few months,” he said.
“The export market is probably going to be better than what the domestic market will be - meaning we miss out.”
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But farmers who won’t be missing out, like Stuart Crosthwaite from Victoria’s north east, are hailing the deal a “fantastic initiative”.
“I think more recently we’re [Murray Goulburn] finally focusing a little bit more on the domestic market, which now makes up 50 per cent of our product mix; that is UHT milk, yoghurt, powdered milk, cheeses and those types of products,” he said.
“That is significant and we should be paying more attention to it.”
The South Australian Farmers Association is also critical of state government support which it says is lacking.
“There’s certainly no financial support for business for the state’s dairy farmers from state government, said president David Basham.
Not the case of no support, says state government
The high Australian dollar and poor farm-gate prices is what is hurting the SA dairy industry, not a lack government support, according to Minister for Agriculture Gail Gago.
“SA dairy industry has historically been strong and an important contributor to jobs through the supply chain. I look forward to working with the industry where I can to support its long term viability,” she told Fairfax in a statement.
“I have also committed to encouraging banks to support dairy farmers through the current cash flow issues in line with a request for industry and I am looking at what can be done with land title divestment.”
Ms Gago said she had committed her department to working with the SA Dairy Farmers Association to ensure farmers had access to financial advice and counselling.
She said she had also offered to work with the SA Dairy Farmers Association to assist in developing a strategic plan for the state to help improve the market share and develop new value-added milk products.
A national industry summit is likely to go ahead this year to work through industry concerns, which Ms Gago said she fully supports.
The summit is a result of a recent dairy rally held at Murray Bridge, joined by more than 200 people to voice their concerns.