SQUEEZED OUT OF THE INDUSTRY

Australian milk is the cheapest it has been in 20 years, with the discounting of milk in supermarkets becoming a very public debate. But our farmers who are producing the milk say that this is the beginning of the end.

Naeun Kim reports for The Milk Moustache.

Robert Miller: With the Coles supermarket fiasco, after 152 years with one processor, our family has been forced to shift to another company. Otherwise I was looking at losses of over $100 million on this farm. 

VO: Dairy farming has been in the Miller family for over 150 years. Farmer Robert’s lived through droughts and floods – the word mother nature can bring – but nothing has him more concerned about his future than the war being waged by the supermarket giants Coles and Woolies.

Robert Miller: With the opportunity and price of 48 cents a litre as I was, I could employ probably around four or five or six employees. I’ve got that much business, the world markets are seeking milk, but yet here we are in New South Wales with our processor cutting back its processing capacity and saying to farmers they don’t want milk; there’s an oversupply.

(Coles advertisement)

VO: But Coles says in a recent statement that its price reduction will not hurt the dairy farming industry.

VO (Coles statement): Coles fully funded retail milk price reduction from its own profit margin. Coles also paid milk processors a higher commercial contract price for packaged milk supplies, which was more than enough to offset any switch from branded to private label milk.

VO: But for milk selling for less than water, the damages have already been made.

Robert Miller: A dollar a litre was what farmers or the consumer was paying in 1992. Just above 40 cents a litre, which is above my cost production. It’s not encouraging but it is survival, and until things change I don’t have a choice. I have a lot of debt and therefore I have repayments to make. It’s a catch 22.

VO: While the supermarket giants have turned the war into cash cows, consumer advocacy group Choice says consumers aren’t saving as much as they think.

Ingrid Just: The question is – what other products on the shelves are supermarkets increasing in price in order to manage the lost leader in cheap staples like bread or milk?

VO: But Claire Buchanan from Woolies is siding with dairy farmers and pointing the finger at Coles.

Claire Buchanan: Look, we have serious concern about the long-term sustainability for the dairy industry about this single deep discount on this single product. Woolies won’t be beaten on price, that’s our commitment to our customers so therefore we will always match the cheapest price in the market.

(Woolworths advertisement)

VO: But the milk war has turned sour as Australian Dairy Farmers reports that the price war has taken $77 million out of the milk supply chain, leaving farmer Robert with no hope for the future.

Robert Miller: The future of dairy farmers, there’s a lot of uncertainty out there at present, and there’s no encouragement for new farmers to come in, which is a very sad situation.

VO: Robert has many opportunities to expand his business but he can’t afford to take the risk at a time like this.

Robert Miller: I have other farmers around who are in their 70’s, they don’t want to move off their farms. They’re quite happy to lease their property to farmers like myself, but our situation is it’s uneconomic for us to take on further land at this stage. I’ve already put off two full-time employees; I was employing eight full-time employees.

VO: With Coles and Woolies milking the dairy industry dry, Robert has no idea what’s next.

Robert Miller: We have very little power against the supermarket. When we had a regulated market we all knew what was happening and we had some certainty, but with the corporates taking over the industry, and the supermarkets having the power that they do, from year to year we really do not know what’s going to happen. Having the loss of certainty, it’s very detrimental to business.

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