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Misled-milk prices

The Australian Competition and Consumer Commission (ACCC) has warned dairy processors not to mislead farmers about milk prices following reports that processors are blaming private-label milk contracts with supermarkets for the low prices paid to farmers.

Following a dairy inquiry, the ACCC found that almost all contracts for the supply of private label milk allow processors to pass-through movements in farm gate prices to supermarkets. In addition, farmers are paid the same amount regardless of whether their milk goes into private label or branded products.

ACCC Chair Rod Sims said: “Dairy processors need to be honest with farmers. We have written to a number of processors warning them not to mislead farmers by blaming private label milk contracts for the prices offered for milk at the farmgate”.

“We’re concerned this is misleading as the power lies with processors to raise the farmgate price paid to farmers, and then pass these higher farmgate prices on to supermarkets.”

“Almost all contracts between processors and supermarkets for the supply of private label milk allow processors to pass-through movements in farmgate prices to supermarkets. This means processors set their farmgate prices independent of the supermarkets’ retail prices,” Mr Sims said.

The ACCC reported: [it] has heard reports from a number of dairy farmers in NSW and Queensland who are struggling to cover costs in the face of drought conditions. These reports allege that processors say they cannot pay farmers more for their milk because of the low $1 per litre price for private label milk. Given the existence of these pass-through clauses, this is not correct”.

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