PEAK dairy farmer group Australian Dairy Farmers (ADF) is urging retailer Aldi to raise the price of its discount milk line in a bid to give hardworking farming families a fair price for their product.

ADF chief executive David Inall said Aldi had a unique opportunity to move on discount milk and "be a hero to farmers".

He warned there was a "real danger of Australia not having a dairy industry" if more farmers leave because their milk price does not reflect their high production costs.

“Farming families put tireless effort and resources into producing a quality product, day in and day out, and to see it devalued to the consumer has a deep and lasting impact.”

Aldi currently sells cheap milk for 99 cents per litre but have, until now, flown under the radar.

ADF’s plea to Aldi follows the announcement by Woolworths yesterday that it would begin raising the price of its $1 per litre milk range by 10 cents, with the entire increase going back to farmers.

“Woolworths has adopted a model where the full 10 cent increase goes back to the farmers who supplied that milk, via an audited process.” Mr Inall said.

“It is extremely disappointing to see that Coles has chosen not to follow Woolworths lead in demonstrating support for farmers. Collecting customer donations at the register is tokenistic, at best.”

Farmers are currently suffering through a severe drought, with production costs skyrocketing due to high grain, hay and water prices.

The last Dairy Australia National Dairy Farmer Survey (NDFS), undertaken in early 2018 before the drought really started to bite, found 40 per cent of dairy farmers did not make an operating profit in the 2016-17 financial year.

The survey revealed just 47 per cent of farmers felt positive or very positive about the future of the industry; down from a peak of 75 per cent five years ago.

Dairy Australia is forecasting national milk production in 2018/19 will fall below 9 billion litres for the first time since the 1990s, in another blow to industry confidence.

Mr Inall said it was up to retailers to ensure their suppliers received an equitable price for their product.

“Aldi can take a leadership position and ensure their suppliers receive a fair payment for their hard work.

“If more farmers leave because their milk price doesn’t reflect their high production costs, there will be a real danger of Australia soon not having a dairy industry.”  

Meanwhile Coles has not bowed to public pressure and will continue to sell $1 a litre milk, so far refusing to follow Woolworths lead and increase milk prices to benefit struggling farmers. 

A Coles spokesman said the supermarket giant was seeking a long-term solution that did not disadvantage its customers and also supported dairy farmers.

The spokesman said Coles knew that many customers in Australia faced cost of living pressures and did not want them to be disadvantaged through price increases.

"We also note that the ACCC has previously examined the Australian dairy industry and concluded that house brand milk pricing does not negatively impact farmgate milk prices," he said. 

“Coles is passionate about supporting our farmers and producers and in the past six months has committed $16 million to support this important industry. This includes contributing around $4 million to almost 640 dairy farmers through the ColesDairy Drought Relief Fund and more than $7 million in partnership with the Country Women’s Association, resulting in over 2,300 additional grants for drought-affected farmers.

Coles has been exploring additional options in relation to how to best support Australia’s hard working farmers, including how we ensure that drought assistance initiatives are as efficient and effective as possible. At the moment, there are a variety of different models being adopted by retailers and producers. 

Coles is committed to finding a better model that can be adopted by the industry to assist Australian farmers, and intends to liaise with relevant parties including government and the ACCC.

In the meantime, Coles will continue to look at ways to support Australian farmers, including by collecting customer donations at our supermarket registers nationally from Monday 25 February, until further notice. Coles will match these donations dollar for dollar.

Earlier: Monday 4.50pm

News that Woolworths will ditch its dollar milk from Tuesday is a step in the right direction but further change is needed, a dairy representative says. 

United Dairyfarmers of Victoria Wannon branch president Bruce Knowles said dairy farmers would be happy with the move and hoped supermarket giants Coles and Aldi would follow suit.

The $1 litre fresh milk will be removed from stores and the cost of two and three litre varieties of Woolworths-branded fresh milk increased to $2.20 and $3.30 respectively.

As the change goes national, it will deliver higher milk prices to more than 450 Australian dairy farmers supplying into Woolworths branded fresh milk.  

A statement issued by Woolworths said every cent of the increase would end up with Australian dairy farmers.

“I think if Coles and Aldi can do the same thing it will be good for the industry,” Mr Knowles said. “The dollar milk has been a bone of contention and hasn’t gone down well. 

“It’s a good move. I think farmers are more interested in getting a fairer return for their efforts and we want to see this being reflected with regard to the sale of their produce in the supermarkets. While fresh milk is one component of it, it’s a move in the right direction.”

Under the model, the extra 10 cents customers pay on each litre is distributed in full to dairy farmers by processors in line with the usual payment cycles, the statement said. 

Mr Knowles, a Tyrendarra dairy farmer, said he hoped the increased funds would be returned to farmers but that it would depend on their individual contracts.

He said farmers were struggling to make ends meet across the whole industry. “The bottom line is getting less and less... Whether it’s the price of water up north or the electricity prices, they need to get better payment for their price so they can carry on farming.

“It’s just getting more and more difficult and it’s reflected within the industry now we’re seeing farmers moving away from farming. 

“The whole industry needs to have a good look at themselves. Government needs to have a look at the way costs are being impacted on the dairy farmers so at the end of the day we can get a good return,” Mr Knowles said.  

Woolworths Group chief executive Brad Banducci said the move followed consultation with industry bodies where they heard that the national outlook would continue to be extremely tough for dairy farmers.

“This is affecting milk production and farm viability, which is devastating for farmers and the regional communities in which they live,” Mr Banducci said. “It’s clear something needs to change and we want to play a constructive role in making this happen.

“While we’re realistic this won’t solve broader structural issues, we hope it will help inject much-needed confidence into the sector and the regional communities dairy farmers do so much to support."

Mr Banducci said he was aware of the budgetary pressures facing  customers and Woolworths would work to offer great value to customers across their total shop. “We believe it's the right thing to do and a key step in shoring up fresh milk production in Australia.”

Australian Dairy Farmers chief executive David Inall said it was a game changer in the fight against discount dairy that had long frustrated the industry.

“It is reassuring that Woolworths has committed to deliver the full 10 cent increase back to those farmers who supplied the milk into that product category,” Mr Inall said. 

“Removing $1 milk is not just intended to restore farmers’ financial confidence, but it will also boost confidence in regional communities and small businesses that rely on the industry.

“Consumers can buy fresh milk from Woolworths knowing they are supporting the Australian farmers who supplied it.”

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