Farmers milked in power imbalance

THE competition regulator has criticised a “power imbalance” between farmers, milk processors and supermarkets and has called for a compulsory code of conduct for the national diary industry.

The Australian Competition and Consumer Commission highlighted pressure by supermarkets on milk processors which has reduced wholesale and retail prices, however it said this did not impact the farm gate price paid to farmers and had benefited consumers.

After a 12-month inquiry into the industry, the ACCC made eight recommendations to address the power imbalance, improve price forecasts, stop processors putting too much risk on farmers and make it easier for farmers to switch processors.

“What’s clear is that processors, often under pressure from supermarkets or export market competition, use their relative bargaining power to shift risks on to dairy farmers,” ACCC commissioner Mick Keogh said.

“The power imbalance is evident in the nature of contracts between the processors and farmers. These involve uncertain pricing information and contract terms which deter switching.”

The ACCC also found big supermarkets pressured milk processors to lower wholesale prices and this had reduced profits to the processors for cheap plain label milk.

Milk processors Murray Goulburn and Fonterra welcomed the interim report.

Queensland Dairyfarmers Organisation slammed the report for not going far enough.

According to the ACCC, Victorian, South Australian and southern NSW farmers received 45c a litre for their milk regardless of retail price. In Queensland and northern NSW farmers got 59c a litre.

However, profit to milk processors, often part owned by farmers and shareholders, was cut from 55c a litre to 37c across all states, when milk was sold as $1 a litre supermarket brands.

Mr Keogh said a voluntary code of conduct put in place by milk processors was not good enough. He said it was not enforceable and processors could choose to not participate or not comply, with no negative consequences.

Processors, often under pressure from supermarkets or export market competition, use their relative bargaining power to shift risks on to dairy farmers ACCC COMMISSIONER