Tight margins hurt processors says Holt

Nationals South West MLC Colin Holt said he was "disappointed" Wesfarmers chief executive officer Richard Goyder refused to acknowledge shareholder concerns $1-a-litre milk was damaging WA's dairy industry.

Wesfarmers owns Coles which launched $1-a-litre milk on Australia Day 2011.

At the annual meeting in Perth on Thursday, Mr Goyder responded to questions from shareholders on a view widely expressed by dairy farmers and WAFarmers, that Coles' $1 milk has contributed to the dairy crisis with two farmers being forced out of the industry since September and the likelyhood of more to go in January.

"Tighter margins mean less money for the processors to pay farmers," Mr Holt said.

"The big supermarkets must acknowledge that a sustainable price for milk is crucial for the survival of the WA dairy industry

"Some WA dairy farmers have gone out of business, while others are struggling to make ends meet as milk processors cut milk prices.

"Wesfarmers, as the owners of Coles Supermarkets, should be supporting WA jobs and dairy producers."

He said an independent report by rural consultant Steve Hossen for the WAFarmers' dairy council concluded that $1-a-litre milk cost the WA dairy industry supply chain $25 million annually.

Mr Holt also reiterated his claim WA was importing 300 million litres of milk as cheese through the big supermarket chains.

"We pay the same price for the eastern States cheese here as they do in Melbourne, so Coles and Woolworths are subsidising that cheese transport," he said.

"If we could make just 10 per cent of the cheese here in Brunswick Junction, rather than importing product, we would not only keep dairy producers in business, but also grow the industry.

"I challenge Wesfarmers to stop subsidising cheese from the eastern States and to commit to stocking cheese made in WA".

Mr Holt said he was pleased the Australian Competition and Consumer Commission (ACCC) had announced it would look at the issue as part of its 12-month investigation which began this month into Australia's dairy industry.

He encouraged consumers to support WA's dairy industry by buying branded milks and locally produced dairy products.

Mr Holt also took aim at Wesfarmers chairman Michael Chaney who made disparaging remarks about The Nationals WA proposal to lift a State 25 cents per tonne production rental fee on iron ore mined by Rio Tinto and BHP Billiton to $5/t.

"What we're proposing is not a new tax or charge, but a revision of an existing, tax-deductible charge which has not changed for 50 years," Mr Holt said.

More than 1500 shareholders packed into the Perth Convention and Exhibition Centre for the Wesfarmers' annual meeting.

While Coles was empathetic to dairy farmers, farm-gate prices here were set by world prices, Mr Goyder said.

"We've done a lot to ensure farm-gate prices are as high as we can get them but if we increase prices tomorrow the profit would go to Coles, if we returned the money to processors the processors would keep it," Mr Goyder told shareholders.

"We've had some work done on what can be done to restructure the dairy industry and we'll continue to work constructively to ensure we have long-term supply arrangements.

"Unfortunately Wesfarmers and Coles by itself can't solve this issue."

In his chief executive's report he said Coles had recorded cumulative food and liquor price deflation of 7.5 per cent since the 2009 financial year.

"In fact, we estimate that a typical family shopping at Coles is more than $600 a year better off than they would have been, before we acquired the business in 2007,'' he said.

"It is important to note that we have provided this benefit to customers while improving returns to shareholders."

Mr Goyder and directors also faced shareholder scrutiny on executive remuneration, the future of Wesfarmers' coal business and its expansion into the UK hardware market.

p Brownes Dairy is still awaiting Australian Quarantine Inspection Service (AQIS) assessment of its Brunswick Junction cheese plant for an export licence.

Brownes said it has completed the required works but was waiting on an AQIS auditor to inspect the plant and approve the licence.

The company has argued producing cheese in WA purely for domestic consumption is unprofitable when it is competing against greater manufacturing economies of scale for eastern States producers which also have economic whey disposal or processing options.

Transport costs down to $150 a tonne across Australia were also not prohibitive for bringing bulk cheeses into WA, Brownes said.