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Australian dairy processors warned on milk prices


The ACCC has warned dairy processors not to mislead drought afflicted dairy farmers on milk prices.

The warning follows reports of processors blaming their private-label milk contracts with supermarkets for the low prices offered to farmers, according to the ACCC.

“The ACCC has heard reports from a number of dairy farmers in NSW and Queensland who are struggling to cover costs in the face of drought conditions,” the competition regulator said.

“These reports allege that processors say they cannot pay farmers more for their milk because of the low $1 per litre price for private label milk. Given the existence of these pass-through clauses, this is not correct.”

According to the ACCC, a key finding of its recent Dairy Inquiry was that almost all contracts for the supply of private label milk allow processors to pass-through movements in farm gate prices to supermarkets.

In addition, farmers are paid the same price irrespective of whether their milk goes into private label or branded products. 
The findings were drawn from detailed evidence provided by supermarkets and processors, the ACCC said.

“Dairy processors need to be honest with farmers. We have written to a number of processors warning them not to mislead farmers by blaming private label milk contracts for the prices offered for milk at the farmgate,” ACCC Chair Rod Sims said.

“We’re concerned this is misleading as the power lies with processors to raise the farmgate price paid to farmers, and then pass these higher farmgate prices on to supermarkets.”

“Almost all contracts between processors and supermarkets for the supply of private label milk allow processors to pass-through movements in farmgate prices to supermarkets. This means processors set their farmgate prices independent of the supermarkets’ retail prices.”

Source: Food & Drink Business


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