The totem of $1 milk

Two years ago today, Coles offered up milk as a sacrifice in the name of market share. It’s now become totemic in Victoria.

The reality is that about two-thirds of Australia’s milk comes from Victoria’s cows but not a lot of my farm’s milk ends up in the supermarket fridge.

We supply the Murray Goulburn Co-op, which processes about one-third of Australia’s milk and has the technology to make a huge variety of dairy foods and ingredients. It sells to the highest bidder, so the percentage that gets exported depends on how well global commodity prices compare with local dairy markets. In 2011/12, 49 per cent was exported, which is pretty typical.

But Victorian farmers are demoralised. Many are in desperate financial positions. The effects of the collapse in global commodity prices, skyrocketing energy prices, high feed costs and the high Australian dollar are clear but shrouded in secrecy is the impact of the supermarket war.

While $1 milk gets all the attention, other dairy products like butter and cheese have also been hit by the supermarket price war. Murray Goulburn has invested heavily in relaunching its supermarket brands and CEO Gary Helou infamously got all hot under the collar last month about Coles’ refusal to stock MG’s Devondale cheese. But nobody can talk about how Coles and MG negotiate our livelihoods behind the tinted windows of “Darth Vader’s Castle” as the Coles HQ is fondly nicknamed by its suppliers.

We’ll probably never know just what the damage has been – only that our situation is very different from that in states like NSW and Queensland where there is pretty much total reliance on fresh milk sales.

But what those claiming to be “the voice of reason” dismiss is the effect ‘milk that’s cheaper than water’ has on the psyche. It signals to farmers that a fair go no longer matters. And that’s what hurts the most on Australia Day.

7 thoughts on “The totem of $1 milk

  1. I really thought the guy who wrote the article you linked to did a great job of explaining the context of the $1 milk, especially this quote:

    “As for the discounted milk, the less said about this the better. It affects about eight per cent of the milk produced in Victoria and therefore I find it hard to comprehend how this is the cause of all of our problems. The simple fact of the matter is that our milk companies are the ones that sell it to the supermarkets. If you don’t want discounted milk, don’t let your factory sell unbranded milk. Maybe a few more relevant issues to focus on would be the Aussie dollar, free-trade agreements, transport costs and the efficiency of our milk factories — overstaffed, over-capitalised?”

    I know you have made many of these points Marian and what you say about the symbolism of cheap milk may be true but maybe he is right? I was really surprised about the 8% figure – if that is true then the issue is getting far too much press. And this is where I think you are being badly let down by your cooperative and representative bodies.

    • I think Liam and I are mostly in furious agreement as you say but my point is that the supermarket war is not just about the $1 per litre milk. It’s all the other dairy foods too. It’s telling that 51% of Victorian milk is sold in Australia – nothing to do with global commodity prices, free trade agreements and the Aussie dollar. Perhaps the cheap butter, cheese and other dairy foods (actually, pretty much all fresh food) should be getting more press!

      Regarding processors, Murray Goulburn has embarked on a massive cost-cutting campaign, which, from memory, is expected to return farmers an extra 3 cents per litre.

      I should emphasise that this blog post was purely about the situation in Victoria. In NSW and Queensland, almost every drop of milk ends up in a supermarket fridge and they need all the press they can get!

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  3. Hi Marian
    Thank you once again for telling the story on-ground the way it is. What Coles have done is set a national artificial floor price for milk that is preventing the true market price of milk being realised. As a NSW farmer caught in this abomination Coles can blame the export market, the processors and the drought and farmer inefficiencies ad infinitum for our plight. What is all boils down to is cows are not machines and farmers would all be doing something else if they wanted to make a motza. We just want a fair price Coles. Transparency and integrity Coles that’s all we ask

  4. Hi Marian
    Having some almost 50 years corporate experiance in the Australian supermarket industry together with 20 years rural property experience, it seems to me that a very radial approach is now called for to assist in the survival of local rural production – not just milk!.The current Australian supermarket duopoly would not be allow to take place in the home of free enterprise, the US so why is this uncompeditive and destructive situation allow is this country? Its time for farmers, manufacturers and suppliers to band together and call on the government (and opposition) and their regulatory bodies to insist on the divestment of 50% of both Coles and Woolworths retail outlets to 3rd and 4th retail chains on sufficient size to ensure the alternate chains viability. This introduction of 2 additional major operators together with IGA would go along way to providing a more level playing field and getting some competion into food purchasing and marketing. I acknowledge that this is not an easy ask but this is what you guys need! This is what Australia needs!

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