Wesfarmers CEO Goyder defends Coles in milk crisis

The Wesfarmers CEO says there’s a limit to what Coles can do the help struggling dairy farmers.

Richard Goyder today said Coles was supporting the milk sector. Picture: Bloomberg.

Wesfarmers boss Richard Goyder has defended the actions of the conglomerate’s supermarket arm Coles in the midst of the current crisis swirling through the nation’s dairy sector, saying it wasn’t to blame for the plummeting milk price.

The dairy industry was subject to the volatility of commodity prices as witnessed in iron ore, beef or sugar, he said.

Mr Goyder said, however, that Coles was helping dairy farmers where it was feasible, with some milk processors in parts of the country, such as North Queensland, likely only able to stay in business due to the support of his company’s supermarket chain.

But Mr Goyder, talking at a press conference today where Wesfarmers unveiled up to $2.3 billion in writedowns due to a slide in earnings at Target and slumping coal prices, also said there was a limit to what Coles could do to help dairy farmers. The comments come as farmers buckle under a more than 15 per cent drop in farm-gate milk prices – a collapse triggered by processors including the nation’s biggest, Murray Goulburn, slashing their farmgate prices.

“Coles accounts for something like 4 per cent of milk production in Australia, milk prices are set globally, I think Coles is helping dairy farmers through long-term supply arrangements not just at Murray Goulburn but also at (processor) Norco and in other regions of the country,’’ Mr Goyder told The Australian.

In 2014 Coles signed a 10-year supply agreement with Murray Goulburn for its $1 a litre private label milk. Coles was criticised by some in 2011 when it launched its $1 a litre milk offer, and was blamed as causing a drop in farmgate prices.

Murray Goulburn has also been attacked this month for slicing its prices paid to dairy farmers, with New Zealand giant Fonterra following, and is the subject of investigations by ASIC and the ACCC.

Mr Goyder has consistently argued Coles was not to blame for downward movement in milk prices, and today said Coles was supporting the sector. It recently announced plans to sell a milk brand across Coles that would direct proceeds to a dairy farmers’ fighting fund.

“And indeed in some markets, for example North Queensland, processors probably wouldn’t be continuing if Coles wasn’t supporting them, we have the farmers brand in a number of states that’s also contributing.

“We are a very small player in this market and I think we are doing our bit but I think it’s a very, very long bow to say that anything we are doing is having the (negative) impact on dairy farmers.”

Mr Goyder said the dairy sector, like mining and resources, was greatly exposed to swings in commodity price.

“If you look globally at dairy farmers, doesn’t matter if they are in New Zealand, the UK, or whatever, at the moment it’s difficult for them because its a commodity and prices are low, and the same could be said about iron ore, the same could be said about meat, or beef or sugar, plenty of other commodities.

“So we are very empathetic to the plight of dairy farmers and we will do what we can but it’s limited to ensure the industry remains viable. Like a whole bunch of industries they are subject to continued rationalisation and pressure I expect.’’