The Australian Competition and Consumer Commission (ACCC) has warned dairy processors not to mislead dairy farmers over milk prices.
This follows reports of processors blaming their private-label milk contracts with supermarkets for the low prices offered to farmers.
The ACCC’s ‘Dairy Inquiry’ found that almost all contracts for the supply of private-label milk allow processors to pass-through movements in farmgate prices to supermarkets.
In addition, supermarkets pay farmers the same price, irrespective of whether their milk goes into private-label or branded products. These findings were based on detailed evidence given by supermarkets and processors.
“Dairy processors need to be honest with farmers,” ACCC Chair Rod Sims said. “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.
“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 independently of the supermarkets’ retail prices.”
The ACCC says some dairy farmers in NSW and Queensland claim they’re struggling to cover costs in drought conditions. These reports allege processors say they cannot pay farmers more because of the $1 per litre price for private-label milk. Given the existence of these pass-through clauses, this is not correct, says the ACCC.