ONE dollar a litre milk is here to stay. This was the overall message of a meeting between WAFarmers and Coles in late December.
Primary Consulting Services Pty Ltd consultant Colin Bosustow attended the meeting on behalf of WAFarmers.
He met with Coles to outline the findings from the milk price sustainability report.
Mr Bosustow said the meeting was successful in that Coles accepted the findings of the report and understood dairy farmers needed an increase in farmgate price to remain in the industry.
"They were supportive of the idea of a milk price rise to the processors, providing those processors could justify their request," he said.
Mr Bosustow said to a Coles representative that the industry saw the $1/L campaign as an indication of an undervalued product.
He said that perception had flowed into a reduction in investment and interest in dairy farms, which was a huge negative for the long-term sustainability for the industry.
"Coles would not discuss the concept of their $1/L milk campaign and they would continue to use that strategy," Mr Bosustow said.
"Instead they wanted to look at a price increase across the whole dairy range.
"But if they increase the price of branded milk, and keep the home brand milk at $1/L, the price difference between the two would be even greater."
He said although parts of the meeting were successful they failed to gain any productive dialogue with Coles on the $1/L milk.
"We weren't really surprised," Mr Bosustow said.
"But it would have been beneficial if we could have discussed it and if they showed some empathy towards the impact it was having on the industry.
"They see it as their right to determine their own marketing strategy."
Mr Bosustow said the next step would be to meet with Woolworths and IGA to discuss the issue.
WAFarmers dairy section president Phil Depiazzi said it was disappointing Coles was adamant about keeping milk at $1/L.
"At the end of the day the cheap milk campaigns have been a real problem for our industry," he said.
"It is hurting processors and it is hurting producers."
Mr Depiazzi said the campaign had been a windfall for supermarkets to attract people into their stores, but he believed it was no longer cheap milk that was drawing the crowds.
"I think the novelty has worn off a bit, but still they decide to keep that price," he said.
"And yet both Coles and Woolworths are prepared to come out and say they are supporting their farmers.
"But it is a paradox because they can't say that and keep milk at a $1/L, it just doesn't work."
According to Mr Depiazzi the supermarkets were prepared to work with farmers to try to achieve a greater return, but he admitted he didn't know how they were going to do that without raising the price.
"I don't want to be negative, but we need a price that is going to sustain the industry so we can be a real and positive contributor to the State's wealth," he said.
A Coles spokesman said the Milk Price Sustainability report was a good report that focused on returns to dairy farmers, and noted that these are influenced by many factors, including the farmgate price.
"The important issue for processors and dairy farmers is not the retail milk price, but the price being paid to processors, as this is what flows through to dairy farmers," he said.
"The retail price of milk is in fact disconnected totally from the farmgate price.
"Coles pays a commercial price to dairy processors, we do not deal directly with dairy farmers.
"We pay our dairy processor more than the break-even point outlined in the Milk Price Sustainability report.
"We also inserted rise and fall clauses in our contracts so that if farmgate prices rise, we pay our dairy processors more.
"This protects the dairy farmer as much as we can.
"Dairy farmer's margins are influenced by many factors including input costs which are totally out of the control of Coles."