The country’s peak dairy body says actions by Australia’s big supermarkets were pushing the dairy sector towards a devastating milk price war — for the second time.
Woolworths cut the price of its home brand milk on Sunday, September 23, claiming it was passing on savings from its processor.
Coles and Aldi reduced their prices within 10 days.
Australian Dairy Farmers said on Wednesday, October 9, that a second milk price war had begun with prices now at their lowest level since 2011, when Coles cut the price of its home brand milk to $1 per litre, followed by the other two supermarket chains.
ADF president Ben Bennett said the price war came at the expense of dairy farmers and processors.
“We all know supermarkets position dairy at the back of the supermarket and discount prices to get consumers in,” ADF president Ben Bennett said.
“They then make the majority of their profits on all the shelves consumers walk past on their way to the dairy section.
“Meanwhile, supermarkets justify their price decrease because processors have opened the season with lower farmgate prices paid to farmers.”
A ten to 15 per cent decline in farmgate income and high input costs have some dairy farmers struggling financially .
“This will only serve to encourage more dairy farmers to leave the industry, which is bad news for all Australians,” Mr Bennett said.
A spokesperson for Woolworths said claims in the media of milk being priced at its lowest since 2011 were incorrect and the current price was its lowest in only two years.
Woolworths-brand milk was reduced from $1.60 per litre to $1.55 on September 23, 2024, prior to which it had been $1.35 in 2022.
The spokesperson said the supermarket was passing on savings currently received from the company’s supplying milk processors due to lower market-wide prices.
Woolworths does not have any control over the milk prices paid to farmers by the processor.
“It's important to note, this change in our retail price has not resulted in a reduction in payment to the farmers who supply our processors,” the spokesperson said.
“We’ve reduced the price of Woolworths branded milk to pass on the savings we’re receiving from our milk processors."
The ACCC stated in a 2020 report that private label pricing was not the cause of dairy farmers struggling with profitability.
“Domestic retail pricing strategies are unlikely to have a direct effect on farmgate prices,” the report said.
The 2019 Senate Dairy Inquiry attributed farmgate price movements to changing demand conditions within markets.
Mr Bennett said Australia’s milk production had been declining for the past 20 years.
“Dairy imports (have been) rising over the same period of time,” Mr Bennett said.
“It means Australian families will be forced to consume more imported dairy, and with an increasingly limited ability to choose quality Australian products.”