Australian processors warned to not mislead dairy farmers on milk prices

By Jim Cornall contact

- Last updated on GMT

The ACCC said it has heard reports from dairy farmers struggling to cover costs due to drought conditions. Pic: ©Getty Images/petej
The ACCC said it has heard reports from dairy farmers struggling to cover costs due to drought conditions. Pic: ©Getty Images/petej

Related tags: Australia, Dairy

The Australian Competition and Consumer Commission (ACCC) has warned the country’s dairy processors to not mislead farmers about milk prices, following reports of processors blaming their private-label milk contracts with supermarkets for the low prices offered to farmers.

A key finding of the ACCC’s Dairy Inquiry was that almost all contracts for the supply of private label milk allow processors to pass-through movements in farmgate prices to supermarkets. In addition, farmers are paid the same price irrespective of whether their milk goes into private label or branded products. These findings were based on detailed evidence provided by supermarkets and processors.

“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,”​ Sims said.

Farmer reports

The ACCC said it has heard reports from dairy farmers in NSW and Queensland who are struggling to cover costs in the face of drought conditions.

These reports allege processors say they cannot pay farmers more for their milk because of the low A$1 (US$0.72) per liter price for private label milk. Given the existence of these pass-through clauses, the ACCC said, this is not correct.

The milk supply chain works by farmers selling their products to dairy processors who process and package the product. Supermarkets then buy the packaged milk from the processors, both private label and branded products, and sell it to consumers.

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1 comment

Milk quality

Posted by Peter Bourke,

We imagine milk quality like most food products depends on the individual animal from which it is collected, its health and possibly age, the feed it is provided plus issues like stress that the animal is under...…...and that is just the start.
Like most consumers we are prepared to pay extra for premium quality versus lower quality - and we determine this from the labelling - so we were really angry and confused this week when my wife purchased 2 bottles of the same company brand and type of milk with the same use by date, from one of the big supermarkets and the first bottle we opened tasted terrible in our coffee...…... so we opened the second bottle and immediately our coffee tasted fantastic just as we expected. How does this occur?

Maybe if we could be assured of purchasing genuine quality grades of milk, we might see farmers pouring more resources into improving their product offerings, the consumer being more selective at the supermarket and being prepared to avoid the $1 litre milk and the supermarkets being forced to give us what we want - the best.

When Supermarket pressure is applied...….. the product quality must fall away as corners are cut.


Trouble is when our milk quality varies alarmingly plus the same milk is used to fill the $1 cheap private label and the more expensive branded bottles, what chance do any of us have of consuming a quality product of our choice.

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