“I am concerned about the welfare of Dairy farmers and the ‘$2 dollar’ milk available at supermarkets. I just want to know which milk benefits the farmers the most and not overseas owned companies who are not passing on the money to farmers. I have been paying the extra buying Dairy Farmers, only to find out that they are owned by a Japanese company!…We are happy to pay extra if we know a fair proportion of the money is going to farmers.”

A fellow called Peter sent me this message in the wee hours and raised a really good point – one that was echoed by CC & Ruby’s question the other day, so I’ve decided to address this thorny issue head-on.

Almost all dairy farmers send our milk to large processing companies because Australia’s stringent dairy food safety laws make it very expensive and difficult to supply consumers directly.

Our farm supplies the Murray Goulburn Cooperative, which is owned purely by the farmers who supply it. If you buy Murray Goulburn’s Devondale dairy foods, you know 100% of the profits are being returned to dairy farmers. The wonderful thing about MG is that because it’s owned by farmers for farmers and processes around 35% of Australia’s milk, it tends to set a farmgate price benchmark for the other processors.

On the other hand, it doesn’t pick up milk from right around Australia, concentrating on the biggest milk-producing state of Victoria. If you’re a dairy farmer in northern NSW, for example, you don’t have the option of supplying the Co-op and are more likely to supply a privately-owned processor. These privately-owned processors sell dairy foods under their own brand names or package homebrand milk under contract to the supermarkets.

When Coles and Woolies embarked on their milk war, it hit the processors hard pretty much straight away because brand name milk sales fell.

The Coles spin doctors said it wouldn’t affect farmers because they deal with the processors, not the farmers. This defies common sense. If a multinational supermarket controlling a huge chunk of retail sales decides to cut its prices below a sustainable level (Coles denies this too but Woolies has gone on record saying $1 per litre is not sustainable), putting its multinational food processor supplier to in turn lower its own costs, how do you expect that processor to respond? By sourcing the raw milk more cheaply of course! And guess what? It buys from small family businesses (98% of Australian dairy farms are family owned and operated) who have the least bargaining power of all.

No, I can’t guarantee that if Peter buys Dairy Farmer branded milk rather than private label, farmers will be better off. On the other hand, it is guaranteed that if Peter buys unsustainably priced milk, someone else will have to pay. That will almost certainly be a farmer and her family in the short term. In the medium term, it will be her cows and the environment and, over the longer term, it will be milk drinkers because there’s no such thing as a free lunch.