Retailers’ price cuts surprise producers

Coles’ decision to cut retail milk, butter and cream prices has surprised dairy leaders.

A Colac district dairy leader says Coles’ decision to cut retail milk, butter and cream prices came as a surprise.

Nalangil’s Mick Roache, a Dairy Farmers Milk Co-operative director, said the supermarket giant’s move to cut home brand dairy product prices had more to do with negotiations with suppliers than gaining market share from Woolworths and Aldi.

“It’ll undermine the dairy industry, which has been kicked in the guts enough with drought, the GFC and high grain prices,” Mr Roache said.

“And now Coles have started this war and others have to follow to hold their market share,” he said.

Coles slashed its butter price by 41 per cent and thickened cream by 30 per cent last week, following the 33-per-cent drop in its milk price.

The Dairy Farmers Milk Co-operative supplies a billion litres of milk to National Foods, making up 12 to 14 per cent of Australia’s milk supply.

Mr Roache said National Foods reduced the amount of milk it supplied for Coles’ home brand milk in previous contract negotiations because the product had a small profit margin.

Mr Roache said the retail price cuts would bring farm-gate prices down “for sure”.

He said the co-operative’s dairy farmers in Queensland and New South Wales would be under pressure to make their farms viable.

“There’s no room in the system for prices to come back, the export price will probably finish at 37 to 38 cents a litre so there’s no room,” he said.

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