Dairy processors have been warned by the Australian Competition and Consumer Commission (ACCC) not to blame their private-label milk contracts with supermarkets for the low milk prices offered to dairy farmers.
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The ACCC’s warning comes as south-west dairy farmers struggle to cover rising costs such as escalating hay prices caused by the drought in much of eastern Australia.
The ACCC said it had heard reports that processors were saying they couldn’t pay farmers more for their milk because of the low $1 per litre price for private label milk sold by supermarkets. It said the processors’ claims were incorrect and has threatened them with legal action if they persist in making them.
The ACCC said a key finding of its recent Dairy Inquiry was that almost all of the processors’ contracts for the supply of private label milk allowed them to pass on rises or falls in farmgate milk prices to supermarkets.
The ACCC also said farmers were paid the same price irrespective of whether their milk went into private label or branded products.
“Dairy processors need to be honest with farmers,” ACCC chair Rod Sims said.
“We have written to a number of processors warning them not to mislead farmers by blaming private label milk contracts for the prices offered for milk at the farmgate,” Mr Sims said.
“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,” he said.
Mr Sims said the flow through price clauses only applied to milk for private label bottles selling for $1/litre.
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