February 18, 2019
SADA Welcomes Woolworths Backdown on $1 milk – but …
The announcement by Woolworths today that they are going to raise the price of $1 milk to $1.10 per litre is welcome. However, while it is a recognition of the harm that is being done by predatory market pricing by the supermarkets it does not attend to the underling flaws in the supply chain.
$1 milk has now been around since 2011. $1 milk in 2011 is now worth $0.89 in today’s prices. The change by Woolworths only returns the supermarket price to where the $1 price was in 2011.
It does not consider the underlying costs of production as the price, whether it is $1 or $1.10 is an arbitrary number set by the supermarkets. Cost of production is driven by many factors such as drought, cost of feed, cost of energy, cost of fuel and many other factors.
What is really needed in the industry is a shelf price which reflects all points across the supply chain. This announcement does nothing to fix any of these issues. What now exists in the industry is two artificial prices rather than one.
Quotes attributable to Andrew Curtis SADA CEO
“SADA does welcome the announcement by Woolworths as a recognition that the $1 retail price has been hurting farmers.”
“This announcement is an important step in breaking the back of what really has been a crippling impost on the dairy industry.”
“But it does not fix the problem.”
“We believe in market forces being used to set the price of milk. The price of Private label milk is not the result of market forces.”
“The other concern is that many farmers will miss out. Farmers who supply other chains will be no better off under this plan. This will further distort the picture for many farmers.”
“We still encourage consumers who want to support the dairy industry to support branded products, because those products reflect the cost of production.”