Senate report leaves sour taste

_Dairy farmers, who have been left disappointed over a senate report into the milk pricing war, have warned of possible milk shortages in autumn because of a lack of financial incentives. _

The report, tabled last week in Federal Parliament after an investigation into price cuts, found they were good news for consumers and most farmers wouldn't be worse off.

But inside the 182-page document, in WA and Queensland where there are fewer processors and milk production is for the domestic market, the impact is 'potentially greater'.

The initial price drop by Coles on Australia Day as part of its 'Down, Down' campaign was quickly followed by Woolworths and other retailers.

What followed sparked a senate review into the impact of supermarket price decisions on the dairy industry.

The report and its recommendations, which sided with the supermarkets, was a heavy blow for farmers.

It called for a study into the dairy industries in each state and reviews for the Australian Competition and Consumer Commission (ACCC), collective bargaining, the Produce and Grocery Industry Code of Conduct and the Competition and Consumer Act.

Price stability and clear pricing formulas were also recommended.

WAFarmers Dairy president Peter Evans said he was disappointed with the report and said what should have been introduced were the recommendations of five senators prepared to stand up to the supermarkets.

Senators Nick Xenophon, John Williams, Bill Heffernan, John Madigan and Christine Milne wanted to prohibit anti-competitive price discrimination, give the ACCC more power and investigate if Coles had engaged in misleading or deceptive conduct.

They also recommended monitoring supermarket price behaviour, setting up a small business and farming commissioner and code of conduct for the supermarket supply chain and legal framework changes to deal with unfair contracts.

Mr Evans said in the medium term, WAFarmers would like to see changes to the ACCC legislation so it has more power to act.

"We are in favour of a free market, and aren't asking for protection. All we are asking for is that the distortion that is created by having two dominant supermarkets is removed," Mr Evans said.

"We are getting between 41 and 45 cents a litre and at that price we will see our industry keep shrinking."

Mr Evans personally believes shortages in autumn could be possible as farmers struggle during January to May to cover costs of production, particularly for feed and irrigation.

It's a risk the industry faces every autumn.

"If we are going to have a sustainable and growing industry, producers need to receive 10 per cent more for milk and a reassurance from processors the price will be maintained for the medium term," Mr Evans said.

"Our processors are on a flat milk supply throughout the year and if you take that into account, it means WA farmers are getting a lower price for their milk than any other state."

Waroona dairy farmer Vernon Pitter and his family had been milking cows since 1920 and said it had been stressful emotionally and financially since deregulation.

"The number of dairy farmers in WA has dropped from 600 a few years ago to 170, and discounted milk is the final straw," he said.

Last financial year, Mr Pitter said it was the worst on record for dairy farmers who battled drought, reduced hay crops, high grain prices and rationed irrigation water at 33 per cent of allocation.

"The discounting of milk on January 24, we didn't need," he said.

In addition, demand for young Friesian heifers from overseas markets, including China, is resulting in the best genetics being sold because farmers need the cash flow to survive.

"Processors are trying hard. It's the supermarkets that are the problem for heavy discounting," he said.

Senate recommendations *

·Processors make pricing structures for sourcing drinking milk reflect volume required, offer price stability and not be dependent on final retail sales of branded versus private label milk.

·Contracts with dairy farmers be clear and consistent formula for milk pricing with unambiguous conditions.

·The Government commission a study into dairy industries in Queensland, NSW and WA and focus on sustainability, capacity to meet future local demand and policy options.

·ACCC review how it releases information about investigations.

·The Government initiate independent review of Competition and Consumer Act 2010.

·The Government review effectiveness of collective bargaining laws for agricultural industries for more balance between negotiating parties.

·The Government review the Produce and Grocery Industry Code of Conduct.