MILK producers in the South West are handing in notice to Fonterra, as whispers of the processor offering superior contracts to preferred suppliers grow louder.
Farmers have suggested some larger producers are receiving at least four cents a litre more for their milk on top of production and quality incentives.
WAFarmers chief executive officer Doug Parker said it was widely known in the industry such contracts existed, as they had been reported by the organisation’s members.
“Processors run the risk of dividing the industry by offering special deals to bigger suppliers with long term contracts,” Mr Parker said.
“If milk supply is a problem then why not pay all farmers the same?
“It has always been the view of WAFarmers that all producers should be paid a fair price.”
Mr Parker said there had been a good relationship within the industry and these contracts ran the risk of ruining that relationship.
“It is understandable larger and smaller suppliers will be upset,” Mr Parker said.
“It is a strategy companies are taking to lock in milk supply but WAFarmers must look out for all of their members and consider the effect it will have on producers.”
The issue was to be discussed at the WAFarmers dairy meeting on Tuesday.
Dardanup producer John Giumelli was outraged when he discovered he was subsiding larger farmers to the extent of around 7c/L.
Mr Giumelli had given notice and is going to transfer to another company after he was denied a higher price for his milk even though he was sure such contracts exist.
When he questioned Fonterra, it neither confirmed nor denied it had been offering more to certain suppliers.
A Fonterra spokesperson gave Farm Weekly a similar response, stating Fonterra had contracts in place with all its suppliers.
“These arrangements are commercially sensitive,” the statement said.
Mr Giumelli was fuming at the processor’s behaviour.
“By having two price schedules, they are dividing producers within the company and I predict it will bring about their own demise,” Mr Giumelli said.
“Larger producers are already rewarded for producing higher volumes of milk.”
“I am losing around 3c/L because of these volume hurdles and now in excess of 4c/L a result of these contracts.
“My anger rose to new levels when strong evidence came forward that a small number of producers had been offered bonuses of around 4c/L above their fellow producers but with strong confidentiality riders.
“If I could I would walk away tomorrow, I would, but after I told Fonterra I was leaving, it threatened me with legal action if I did not give the required three months notice,” Mr Giumelli said.
“I was told in August that I would only need one days notice if I ever chose to change processors.
“But since the milk supply has started to decline it has dug up old contracts which say this is not the case.
“Since Fonterra took over from Peters and Brownes the relationship between suppliers and the company has deteriorated,” Mr Giumelli added.
“They treat their suppliers as a cost and not an asset.
“They are just out to get milk as cheap as possible and as a result have lost many suppliers.”