Farmers demand Coles and Aldi follow Woolies’ lead in milk war

Fourth-generation dairy farmer John Keely isn’t about to knock back a helping hand, no matter how small the offering.

Dairy farmer John Keely on his property at Cohuna in Victoria yesterday: ‘Dollar-a-litre milk never should have existed in the first place’. Picture: David Geraghty

Fourth-generation dairy farmer John Keely isn’t about to knock back a helping hand, no matter how small the offering.

In the face of a prolonged drought, record water costs and soaring fodder and energy prices, yesterday’s decision by Woolworths to end the eight-year $1-a-litre supermarket milk-price war was better than nothing.

“The Woolworths decision is long overdue and we thank Woolies, but dollar-a-litre milk never should have existed in the first place,” said Mr Keely, who milks 250 cows on his property at Cohuna, 275km north of Melbourne.

“It completely devalues the high-quality product we’re supplying and has never reflected the true cost of production.”

The $1-a-litre price war began in 2011 when Coles dropped prices and Woolworths followed suit. But the supermarkets have faced public and political pressure to charge more for milk and pay farmers more.

While Woolworths took the lead yesterday by increasing the price of two ­litres of milk to $2.20, there was a sense that the move was “too little, too late” for an industry that has seen dozens of producers forced out of business in recent months and left many more considering their future.

According to Dairy Australia figures from November, milk production was down 20 per cent on the previous year in northern Victoria, with an 8 to 9 per cent ­decrease Australia-wide, as the cost of maintaining their herds ­becomes too much for many ­farmers.

Of about 5500 dairy farmers in Australia, just 450 stand to benefit from the extra 10c-a-litre Woolworths has pledged to pass directly to farmers. Unless Coles and Aldi follow suit, the majority of farmers may struggle to keep their businesses afloat.

Last night, Coles indicated that the war was not over.

“Coles is committed to finding a better model that can be adopted by the industry to assist Australian farmers,” the company’s statement said.

“We also note that the ACCC has previously examined the Australian dairy industry and concluded that house brand milk pricing does not negatively impact farm-gate milk prices.”

The nation’s third-biggest supermarket chain, the German-owned discounter Aldi, sells milk at even lower prices than Woolworths and Coles. A spokesman for the group did not return phone calls last night.

Woolworths said yesterday that “every cent” of its 10c-a-litre price increase would go to Australian dairy farmers, with an estimated $30 million a year distributed in a similar manner to the $5.8m raised through the supermarket’s Drought Relief Milk range. That cash has been administered by industry bodies including Queensland Dairy Farmers and NSW Dairy Connect, going to 285 farmers, predominantly in NSW and Queensland, since September.

“It’s clear something needs to change and we want to play a constructive role in making this happen,” Woolworths chief executive Brad Banducci said.

This time last year, Mr Keely paid $200 a megalitre for water to irrigate his property. The price now is $490. The price of hay has more than doubled in the drought, while the grain he feeds his stock has gone from an average price of $274 per tonne last year to $435.

Gary Kerr, chief executive of the Farmer Power ­advocacy group, yesterday spoke of more than a dozen dairy farmer suicides over the past year.

“It’s good Woolworths have made this move, but it’s a drop in the ocean in terms of all the factors farmers are dealing with,” he said.