Brownes and Coles up farmgate milk prices for WA farmers

A day before all milk processors were due to release indicative minimum milk prices for the coming season under the national dairy code of conduct, Brownes this week revealed it will increase its minimum farmgate price by 7.5 cents per litre from July 1.

This will take Brownes' total farmgate price increase over the past six months to 12.5c/L and its increase since July 1 last year to about a nett10.5c/L.

Brownes had not revealed its minimum monthly price schedule for the new season at the time Farm Weekly went to press.

However it is understood its new monthly prices could range from about 53.5cpl to up to about 74.5c/L, depending on the month of the year, on an exclusive supply agreement.

Fifty of WA's 120 dairy farmers are contracted to supply Brownes, which collects a total of about 140 million litres a year from them.

Coles, considered a processor because it buys milk direct from farmers for its own-brand milks, on May 27 put new price schedules up on its website indicating it will lift prices by up to 10c/L and offer non-exclusive one, two and three-year contracts to suppliers for the first time.

Coles has previously only offered exclusive contracts which committed farmers to only supplying milk to Coles no matter how much they produced.

From July 1, Coles is expected to pay the equivalent of an average of 70c/L next season on an exclusive contract and 68c/L average on a non-exclusive contract.

However, the minimum price schedule on its website, set out in dollars per kilograms for butterfat and protein, indicates that while it will pay more next season, its prices proposed for the 2023-24 and 2024-25 seasons will come back between 64c/kg and 53c/kg for butterfat and between 79c/kg and 65c/kg for protein.

The schedule indicates Coles will pay $9.44/kg for butterfat and $11.61/kg for protein for most of next season, apart from peak milk production months of September-December when it will pay $8.02/kg for butterfat and $9.87/kg for protein on exclusive contracts and slightly less on non-exclusive contracts.

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A Coles spokesman confirmed the company was looking to buy a total of 42 million litres of milk from farmers next season, an increase of about one third over what it bought and had processed this season.

The spokesman also confirmed farmers who had signed two and three-year contracts last year with Coles at a lower farmgate price, would have the option of taking up new contracts at the higher prices offered for next and subsequent seasons, but must sign a new supply agreement by June 30.

Harvey Fresh owner Lactalis Australia has also let it be known it will pay 4c/L extra to farmers prepared to sign a four-year supply contract with it, which follows a price increase of 5c/L earlier in the year to existing suppliers.

Harvey Fresh buys milk and processes and bottles it as some of Woolworths' own-brand milks, so must ensure it has secured adequate supply to fulfil its five-year contract with Woolworths.

Previously Brownes had held the Woolworths' own-brand contract, believed to now be the biggest milk processing contract in WA since Coles began buying milk direct from farmers, since 2014.

The new deal with Lactalis-Harvey Fresh was done last June and took effect from January 1.

Bega Dairy & Drinks, which processes and packages Masters brand milks in WA, was also expected to offer farmers more for their milk when minimum prices were made public this week.

Bega processes and bottles Coles' own-brand milks under a toll agreement, but with the milk purchased by Coles direct from farmers, Bega is not under the same pressure as Harvey Fresh to secure supply.

Brownes chief executive officer Natalie Sarich-Dayton said the price increase offered by her company to farmers was to ensure viability of the WA dairy industry.

She said with a decline in milk production in every State there was a risk on not having enough milk to feed WA families,

"WA farmers need to be incentivised to keep producing the high quality, fresh milk that Western Australian families have come to expect from Brownes," Ms Sarich-Dayton said.

"Our farmers are doing it tough and we want to encourage them to keep supplying this State with the fresh produce we've come to expect.

"Consumers are paying more than double for a litre of almond or soy milk in the supermarket, compared to a litre of Western Australian fresh milk.

"We need to get these price increases into perspective."

Ms Sarich-Dayton said dairy farmers were leaving the industry at record rates due to rising feed costs, labour shortages and a "net migration" from dairy to beef as farmers sought higher returns from their enterprises.

"WA is now seeing milk being tankered across the Nullarbor to fill gaps in supply," she said.

"If we want to have a sustainable dairy industry in WA, we need to ensure our WA farmers are rewarded for continuing to produce milk for our supermarket shelves."

WAFarmers' dairy council president and Forest Grove dairy farmer, Ian Noakes, welcomed the forecast farmgate milk price rises but pointed out they were only in line with a rising cost of production.

"Milk production volume is down about 6 per cent for the year and 8pc last month, that's a pretty strong message, so processors had to do something," Mr Noakes said.

"While the increases are welcome, to my way of thinking the processors are only playing catch up, it's not overly generous on their behalf.

"The cost of production has increased by at least 7-8cpl over the past year.

"Since last spring, the cost of fertiliser has increased 5c a litre, fuel costs have gone up, wages are higher and farm workers harder to find and while the war between Russia and the Ukraine continues it looks like grain prices will go up too.

"These increases are only maintaining the status quo," he said.