ACCC warns milk processors about price claims

Dairy processors have been blaming their private-label milk contracts with supermarkets for the low milk prices offered to farmers, but the Australian Competition and Consumer Commission (ACCC) has said this is misleading.

A number of dairy farmers in NSW and Queensland reported they are struggling to cover costs during the drought. Processors have claimed they cannot pay farmers more for their milk because of the low $1/L price for private label milk. However, the ACCC has said this is not the case, and has sent written warnings to processors calling for them to be honest with farmers.

The ACCC’s dairy inquiry — which looked into the competitiveness of prices, trading practices and the supply chain in Australia’s dairy industry — found that almost all contracts for the supply of private label milk allowed processors to pass on the changes in farm gate prices to supermarkets. The ACCC also said farmers are paid the same price regardless of whether their milk goes into private label or branded products.

“We’re concerned this is misleading as the power lies with processors to raise the farmgate price paid to farmers, and then pass these higher farmgate prices on to supermarkets,” said ACCC Chair Rod Sims. “Almost all contracts between processors and supermarkets for the supply of private label milk allow processors to pass through movements in farmgate prices to supermarkets. This means processors set their farmgate prices independent of the supermarkets’ retail prices.”

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