In the milk wars - Coles in farmers' sights

Vanguard March 2013 p. 6
David B.

During Summer Holidays on the NSW South Coast, this writer visited a local family-run dairy farm.

On a previous holiday, a lot of signs were tied along dairy farmers fences denouncing Coles for driving dairy farmers broke. It had piqued my interest and a chance of a tour of one of the farms was an opportunity to see dairy farming up close and get some idea of their lives. On the farm tour they showed off the calves and machinery, as well as the herd in for milking, and took us through the processing.

Technology not the problem

It is clear farmers are right up with technology with some pretty sophisticated computerised recording of each cow, their weight, their production of milk, and a range of other automated systems. They were no slouches in applying science to their production. If you like that sort of thing it was quite interesting, the mix of bug-eyed calves and huge cows to keep the young kids engaged and some clever technologies interesting the older. 

While we enjoyed a chilled refreshment of fresh milk on a hot day as the tour wrapped up, the farmer asked us all to buy Dairy Farmers or other branded milk, and not help Coles and Woolworths destroy dairy farming in Australia.  She explained Dairy Farmers was a brand owned by 80 dairy farmers, who sell their milk collectively. Her frustration, and even anger, with Coles was palpable. Home brands of the supermarkets are ruining farmers.

Her husband now runs a backhoe and bull-dozer contracting company, to keep the farm afloat. She recounted their experience that when Coles started the milk price war, Coles promised that would have no effect on farmers.

Last year, even the Dairy Farmers collectively had to drop the price they paid themselves. For now, they get 45 cents a litre for their milk. A year ago they had to cop a cut getting 45 cents a litre for 80% of their milk and 14 cents for the rest, dropping their average price to 39 cents, an average cut of 13%.

They don’t know what the price will be next year, but they aren’t hopeful of holding up the price. So much for the milk price war not affecting family-run dairy farms!

Half a dozen farmers near Berry have been so frustrated they contracted an independent processor in the Southern Highlands to bottle “premium-branded” milk and yoghurt. They sell them through boutique specialty stores to get a real return, but this is not open to the industry as a whole.

Monopoly kills the co-ops

The co-ops of the past came up, and the question was asked about what happened to them. The farmer recounted how a proposal came for privatisation of the co-op processing, and most farmers at the time were in their late fifties or sixties. They had mortgages on their farms and little chance of any comfort in their old age. When they were offered money for their co-op shares, 70% had to agree for it to go through. With the debt profile added to the age of farmers, it was accepted, and those left now deeply regret it.

The discussion among the 8 or 9 adults on the tour spread to the main processor in NSW National Foods being owned by Kirin Brewery of Japan. Farmers’ economic troubles are being forced on them by the dominance of their industry and markets by huge processing and market monopolies. Fundamentally, they are the same forces exploiting Australia’s workers. We have to support the poor family farmers.

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Further info:  milk facts

Some short facts about monopolies and pricing

• On Australia Day 2010, ironically, Coles lowered the price of its home brand milk to $1 a litre. Supermarket-branded milk has been selling for $1 for two years now. Coles and Woolworths sell their home brand milk at a loss.

• The penetration of in-house branded products is now high. 70% of the milk product, butter, sold in Australia is in-house brands.

• Greenseas tuna and salmon were dropped from Coles in 2011, to the advantage of Coles home brand seafood.

• Coles in-house brands account for 25% of the products in their stores. Woolworths says its in-house brands account for about 11% of products on its shelves. Coles and Woolworths get 80% of money spent on groceries in Australia.

• In the UK just under half the products on grocery store shelves are in-house brands.