WA dairy industry working to ‘break the cycle’ of retailers’ power over farmers as milk prices rise

WA dairy farmers have been told they won’t be price setters until they can “break the cycle” of retailers holding the power, despite recent price hikes and milk shortages boosting confidence and demand. WAFarmers dairy council president Ian Noakes gave the sombre assessment in his opening address at the organisation’s Dairy Conference in Busselton on Thursday, as competition for milk heats up. The State’s $190m dairy industry has had some reprieve this year after a tumultuous few years, with processors Brownes, Lactalis — which produces Harvey Fresh milk — and Coles all announcing increases to what they pay at the farm gate from July 1. WA Agriculture Minister Alannah MacTiernan launched the WA Dairy Five-Year Industry Development Plan at the conference, with hopes the plan will play a major role in supporting future growth and sustainability of the dairy industry. Mr Noakes revealed he had felt like Oliver Twist — saying “please, can we have some more” — when speaking with retailers about rising milk prices in the years after the introduction of $1/L milk in 2011, and said he wanted to break the “domination” retailers had over dairy farmers. Brownes and Lactalis — which each process about a third of WA’s milk — a recently announced they would up the amount they pay farmers by 7.5¢ per litre and 4¢ per litre respectively, on top of earlier 5¢ increases by both companies in November. Lactalis in June offered farmers a third price hike in six months — up another 4.2c/L — marking a 13.2c per litre jump on last year. Coles — which buys milk from nine WA farmers for its Coles own brand dairy products — announced an increase of $1.64/kg m/v for butterfat and $1.91/kg m/v increase for protein, along with plans to increase the amount of WA milk it processes from 30m to 42m litres in 2022-23. Farmers are now looking at about 63-65¢ per litre, up from 50¢ per litre, where it hovered for many years. It is a positive turn for the industry, which has faced its fair share of challenges — including deregulation in 2000, $1/L milk, several farmers not getting their contracts renewed in 2016 — and has lost more than 30 of its 150 farmers in the past five years. Mr Noakes said the introduction of $1/L milk in 2011 had been one of the worst things to happen to the industry in history, with the controversial price cut slashing the retail price of milk by one third. He said industry had felt abandoned by the Liberal Government when it was facing a “crisis” in 2016, and believed WA Agriculture Minister Alannah MacTiernan had been far more responsive. “When the industry was in crisis in 2016, farmers were very concerned,” he said. “When we went to the Coalition Government to ask for help, nobody wanted to know about it. But you (Alannah) took the time to make sure we were genuine in our approach.” Farmgate prices have risen by almost a third during the past year, with Coles last week warning customers it was raising its retail milk prices — in part due to the “substantial rise” in farmgate prices. Coles Brand one litre milk has risen from $1.35 to $1.60, two-litre milk from $2.60 to $3.10 and three-litre milk from $3.90 to $4.50, after increases in sourcing, transport and packaging. Ms MacTiernan said WA’s dairy farmers had some of the best profitability in the nation but would benefit from “greater cooperation across the supply chain” — including with processors and retailers. “While I agree we haven’t been able to get to the point where we have all of the retailers on board, there has been an improvement in price,” she said. “Presumably that has not been motivated by the goodness of their (retailers’) heart, but an understanding that they actually do need the milk and they have to pay for it.” Both Ms MacTiernan and Mr Noakes flagged hopes the WA Dairy Industry Five Year Development Plan — released this week — would provide an opportunity to engage with retailers, as the once-turbulent relationship between milk processors and farmers started to improve. During her presentation, Ms MacTiernan told the crowd dairy farmers needed to face some of the “existential threats” against livestock and needed to “counteract the meat-free Monday movement”. She urged farmers to tell their story and counteract accusations livestock and dairy were “bad for the planet”. Ms MacTiernan said it would require “a lot of thinking” and a “lot of selling the story”, including selling the role of animals in a sustainable farming system. “Can we really have a sustainable farming system that doesn’t have animals?” she said. “It means I am less enthusiastic about not having grazing animals, because I think the story is more powerful when you have grazing animals with a biological contribution to make. “We need to look at where the critique is coming from in regards to climate and health… we need to have good science to back us up and that we can tell that story to the public.” Ms MacTiernan also flagged the opportunity to export milk into Indonesia.