Communities hit by unfair milk contracts

The impact of commercially unfair milk supply contracts is reaching far beyond family farm gates to economically damage entire communities in southern Australian states, according to Dairy Connect.

CEO Shaughn Morgan said today an analysis prepared for south west Victoria’s Moyne Shire has concluded that the milk price crisis will cost the regional economy more than $67 million.

This total was based on the calculation that a milk price cut of 15 per cent would result in a $170,000–$200,000 annual loss per farm in the local government area.

“This is just part of the reason that contracts between fresh milk suppliers and processors will be at the top of the agenda at a national dairy stakeholder forum after the federal election vote counting process is complete and the federal poll declared by the AEC,” Shaughn Morgan said.

Dairy Connect has extracted an undertaking from the Federal Leader of the Nationals and Agriculture Minister Barnaby Joyce that there would be an industry-wide national roundtable on the crisis. A similar undertaking had been obtained from his opposition counterpart Joel Fitzgibbon.

New Zealand milk processor Fonterra announced 10 days ago it would slash the price it pays Australian milk suppliers next season to an average of $4.75 per kilogram of milk solids (kgms).

The Fonterra figure was higher than the Murray Goulburn Co-op offer of $4.31kgms.

The opening price offering of Bega Cheese was $5kgms with Warrnambool Cheese and Butter’s $4.80kgms.

“The opening milk prices some dairy farmers will receive from the same processor may vary by almost $1 a kilogram of milk solids, according to a new Weekly Times analysis,” Shaughn Morgan said.

“As dairy farmers battle to come to terms with less than break-even pricing, the huge variation across the board is simply adding hurt for producers.

“Until producers can get monthly pricing settled and factor in freight costs and levies, the base calculation of total milk solids income doesn’t deliver any real transparency or clarity for individual family farms.”

Meanwhile, last week in Western Australia, Parmalat-owned processor Harvey Fresh confirmed it would dump five fresh milk suppliers from January.
Harvey Fresh quoted a clause in the existing milk purchasing agreement that said: “Either party may terminate this agreement by giving the other party six months.”

The statement from the processor blamed the decision on “the sustained global dairy oversupply and the loss of planned export sales”.

Shaughn Morgan said the entire industry needed ‘to decide whether a milk supply contract is, in fact, a contract’.

“Innocent suppliers are being financially punished in a number of cases by over ambitious and flawed market growth analysis by processors,” he said.

“If there has to be pain, then that pain should be borne by those responsible.”