Murray Goulburn, the co-op that processes our milk, sent out an email this morning that will have a huge impact on dairy farming: it will supply Coles fresh milk for the homebrand and our own Devondale milk. Here’s an excerpt from MG’s press release:
“• Devondale announces 10-year private label daily milk partnership with Coles
• The Co-operative will also relaunch Devondale branded daily pasteurised milk
• Devondale cheese will return to Coles’ shelves
• Deal will deliver additional profits to Devondale dairy farmers
Devondale (Murray Goulburn Co-operative Co. Limited), the Australian farmer Co-operative, today announced a landmark, ten-year partnership to supply Coles with daily pasteurised milk for its private label brands in Victoria and NSW from July 2014.
Separately, the Co-operative will also relaunch Devondale-branded daily pasteurised milk, through an initially exclusive agreement with Coles, and Devondale cheese will return to Coles’ shelves.
The milk price paid by Coles under this unique agreement locks in a premium that will deliver additional profits to Devondale dairy farmers over the life of the contract. The premium is not affected by price fluctuations in international dairy markets or movements in the Australian currency and the contract
contains rise and fall provisions to protect the premium farmers receive.
As a Co-operative, Devondale will return 100% of the profits from this agreement to its farmer-shareholders through higher farm-gate returns.
Devondale Managing Director, Gary Helou, commented, “The daily pasteurised milk segment is currently mainly supplied by foreign owned companies that repatriate their profits to overseas shareholders. The entry of Australia’s farmer owned Co-operative into this market segment cuts out the middle man and delivers profits directly to farmers.
“This is a logical growth opportunity that extends Devondale’s domestic presence in consumer markets and is expected to lock in returns that will be paid to farmers through higher farm-gate prices. These higher prices will benefit all dairy farmers.”
It goes on to say that:
“We appreciate that there has been considerable public concern about the pricing policy for private label milk. Under the contract agreed with Coles the retail shelf price for milk does not determine the profits that will be received by MG supplier-shareholders.”
“MG expects to receive returns that represent a premium over and above the price available in other markets such as commodity dairy ingredients. The contract is expected to lock in this premium for ten years, regardless of what is happening in international dairy markets or movements in the Australian currency. All profits on this contract will be returned to all supplier-shareholders through improved farmgate returns. This new revenue stream will also reduce volatility by providing an additional domestic earnings stream as a balance to fluctuating export earnings.
“As part of this expansion MG will be taking on new supplier-shareholders across existing and new supply zones to meet the growing demand on our milk supply. This includes growing a local milk supply in the Sydney region. The Sydney milk pricing arrangements are yet to be finalised but importantly, the arrangement provides sufficient flexibility for MG to offer a fair farm-gate price which will be supported by Coles. In other words it is expected that all profits from this project will be returned to our total supplier-shareholder base.”
Will have more on this for you later today.