Dairy farmers react to historic milk price announcement as new code of conduct takes effect
Under the new Dairy Code of Conduct requirements, dairy processors had to post their prices at the same time for everyone to see.(ABC Rural: Kim Honan)
It was an historic moment for dairy farmers.
Monday June 1, 2020, at 2:00pm, milk processors released their opening prices for the next year; the first time they have all had to do it at the same time for everyone to see.
It was a requirement of the mandatory new code of conduct which was introduced to make things fairer for farmers and enable more competition in the sector.
Prices remained steady as the food service sector in Australia and around the world has been severely affected by the coronavirus pandemic, but it was still a big moment for farmers.
'Like Christmas Day'
Dairy farmers in the southern states generally supply companies involved in dairy exports.
Tasmanian farmer Damien Carpenter, from Cuprona, was excited to see all the prices being posted at the same time on different company websites.
"It was like Christmas Day, talking to other dairy farmers and asking 'What did you get?'" he said.
Mr Carpenter supplies Cadbury, who said they will meet southern Australia's milk pool price and Mr Carpenter is happy with that approach and the outcome overall.
"I'm rapt with how it's worked," he said.
"I was wavering before about the code of conduct, but you can look at anyone's contract."
"It gives us certainty and a minimum price guarantee, so it's actually going to be a pretty decent year."
Prices seemed to be landing somewhere between $6–7 per kilogram for milk solids, and while there was a gap between the lowest and highest, it still may not be enough to encourage many farmers to switch processors.
Not all processors can pick up from all areas and farmers are often asked to lock in to a contract for five years, even though they are only given a minimum price for the first year.
Dairy farmer, Graeme Arnold, from Lilydale, Tasmania, switched from Lion to Lactalis in September last year.
He was glad he made the move after receiving a price of $7.01/kg and described the price as "almost extraordinary".
"It's some of the highest prices we've ever been paid and it's comforting to see the company show confidence in the industry and farmers," Mr Arnold said.
Some Lactalis suppliers in New South Wales are not happy with the offer for their region however.
There is a 14-day cooling-off period during which farmers can make a switch.
Northern milk suppliers concerned
In NSW and Queensland, farmers supply the fresh milk market and compare prices in cents per litre rather than fat per kilogram.
Gloucester dairy farmer Graham Forbes from NSW lobby group DairyConnect was happy that prices stayed about the same as last season despite the pressures of COVID-19.
"We've seen the likes of Norco, Richmond Dairy and Lactalis coming out quite firm on last years prices," he said.
Despite that, chair of the NSW Farmers dairy committee, Colin Thompson, is frustrated that contracts are still long and complicated.
"Especially given [industry body] Australian Dairy Farmers developed a code-compliant standard supply contract that is only 12 pages long," he said.
Many farmers are cautious about the success or otherwise of the Code of Conduct given a lot will be riding on step ups and bonuses to be paid later in the season.
Saputo supplier, John Smith, from Buladelah on the NSW mid-north coast, is one of those.
"There is a provision in the pricing for reviews, October January April and June … which can result in a step up, but of course what we have got is a guaranteed minimum price, not an end result," he said.
Supermarkets are 'abhorrent' says Littleproud
In addition to the new prices announced yesterday, Woolworths announced it will continue the 10c/litre levy on Homebrand two and three-litre bottles of milk.
That is expected to generate an extra $30 million for dairy farmers, but Federal Agriculture Minister David Littleproud is angry about the announcement given he had been calling for a much higher amount.
He described the retailers as "abhorrent corporations" who gave farmers a "one finger salute" by failing to increase the levy or expand it to other parts of the dairy cabinet.
"It's all about profit, about people coming in to buy cheap milk as a loss leader, [so along with Coles] they de-valued the dairy industry in this country," Mr Littleproud said.
David Littleproud wants an ACCC review of the Food and Grocery Code of Conduct.
Woolworths Director of Fresh Food, Paul Harker, said the levy provided much-needed relief to dairy farmers.
"While conditions have improved and farmgate prices have gone up since we started the levy in 2018, we're extending payments to provide certainty while dairy farmers and processors find their feet under the new mandatory code," he said.
Woolworths said it will also establish a $5 million dairy fund to offer financial grants for dairy farmers to invest in new infrastructure or technology to improve profitability.
Colin Thompson, from the NSW Farmers Association, said it was a welcome decision, "however it must transition into a price rise on dairy products to create long-term change for farmers".