Supermarket milk prices: Will consumers pay more on back of higher farmgate prices?

The farmgate milk price average has broken $7 a kilogram of milk solids. See whether consumers should expect a rise at the supermarket.

Beef prices are skyrocketing but will dairy follow? Dairy leaders say it’s unlikely.

Robust farmgate prices are yet to be reflected at the supermarket checkout, with rock-bottom retail prices seemingly here to stay.

Generic milk prices remain at $1.20 a litre in Australia’s supermarket giants — Aldi, Coles and Woolworths — despite the farmgate price breaking through the $7/kg milk solids barrier in recent weeks.

United Dairyfarmers of Victoria president Paul Mumford said the farmgate average was starting to reflect the availability of milk supply nationally.

“If the price of milk in the supermarket reflected the actual market, then it wouldn’t have dropped to a dollar a litre in 2011. It would have stayed around $1.50 or whatever back then, kept on rising alongside all other products rather than kept artificially low,” he said.

“It’s at $1.20 now but there’s certainly room to move higher. Whether that happens now, in a few months or further on than that is another question.”

Mr Mumford noted that supermarkets in several states had worked to attract direct supply rather than opt for generic milk through established processors.

“Will that change the price the consumer pays? It may do in the long run but not by much, you’d expect,” he said.

Record livestock prices have been passed on, in part, by the major supermarkets in recent months.

Porterhouse steak at Woolworths has risen from $32/kg in March 2020 to $37/kg in recent weeks, while beef mince has risen from $12/kg in July last year to $15/kg.

Coles’ porterhouse steak has hovered around $37/kg in recent weeks, up from $32/kg, while regular beef mince is $12/kg, up from $11/kg in March 2020.

Queensland Dairy Organisation president Brian Tessmann said while there was a strong correlation between market prices and the meat aisle, the link between farmgate prices and the dairy refrigerator was weaker.

“I don’t think the consumer has got much to worry about when it comes to the price of milk,” he said.

“For sure, when the beef sector is going strong, then you do see it in the meat cabinet at Coles or Woolies. Even pre-dollar a litre, the link between a good year at the farmgate and the price of milk in the supermarket was not as clear.

“When dollar a litre came in 10 years ago, any link between what was happening at the farmgate and the price paid by the consumer was further distorted.”

All three major supermarkets have consistently stuck to maintaining generic prices at $1.20 per litre in recent times.

On the 10-year anniversary of dollar a litre milk, a Woolworths spokeswoman said the supermarket would continue to “offer our customers a wide range of milk at different prices to suit different household budgets”.

A Coles spokesman said: “In June 2019, Coles began sourcing milk direct from farmers in Victoria and southern and central NSW, which allows us to deal directly with farmers rather than through a processor.

An Aldi representative said: “(Aldi’s) fresh milk levy, which has been in place since March 2019, has seen Aldi collecting and passing on in full, 10 cents per litre on all two-litre and three-litre Aldi branded fresh milk products sold.”

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