The announcement by supermarket giant Woolworths – followed half an hour later by arch rival Coles – that it would impose a 10 cents per litre levy on certain lines of milk and pass the money to dairy farmers was initially met with applause.
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A week later, it is being derided as too little too late, even an “insult”, according to the NSW Farmers’ Association.
The association says retailers should end the discounting of dairy products if they are serious about supporting dairy farmers. It makes a fair point.
The levy might help in the short-term but for the sake of food security, the dairy industry needs a sea change in the way it is paid for its products.
The Australian Competition and Consumer Commission (ACCC) is adamant discounting milk prices has no bearing on what processors pay farmers for their milk; farmers see it differently.
They say retail giants using dairy products as loss leaders to lure shoppers back into their stores hurts them by enabling processors to keep farmgate prices low. In times of hardship, such as now with the drought, those low farmgate prices are forcing dairy farmers to seriously consider leaving the industry.
If they do, consumers will inevitably face price increases as milk production declines.
The practice of loss leading is banned in many states in the US because it is regarded as a predatory pricing practice that results in an uneven playing field in which smaller operators have no chance of competing with the bigger players such as Walmart.
That’s why the NSW Farmers Association is calling for an end to discounting of all dairy products. It says it’s the only way to ensure dairy farmers can risk proof their business and ensure their industry remains sustainable.
The association fears the levy might even do more harm than good.
A fundamental pillar in any developed country is the ability to feed itself and be resilient in the face of natural disasters like fire, flood and drought.
Retail practices that might shore up profits for shareholders while eroding the viability of primary producers need to be part of a national conversation. Do we want to place at risk a key part of our food supply by not paying a fair price for its products? If we stop and think about it, probably not.
Food security is too big a deal to be at the mercy of the profit motive.
