October 4, 2013
Third generation NSW dairy farmer Robert McIntosh does not sell his milk to the Victorian-based Murray Goulburn Co-operative but admits he will certainly consider it when his supply contract expires. Mr McIntosh, who has a herd of 190 cows in Berry in NSW, has a contract to supply about 3500 litres of milk a day to Dairy Farmers Milk Co-operative, which sells it to processor Lion.
But he is heartened to see an Australian farmer-owned co-operative take on a major processing role in the fresh drinking-milk market, which has been dominated since deregulation in 2000 by foreign-owned entitites Fonterra, Lion and Parmalat, The Australian Financial Review reports. “Even though I don’t supply them (Murray Goulburn, also known as Devondale), I’d be looking hard at it when our contract expires,” he said. “It’s a direct link to farmers for milk pricing and that makes a lot of sense.”
The deal that Coles has struck with farmer-owned processors Murray-Goulburn and Norco received a generally positive response from farmers, though some were awaiting more details on pricing structures. Murray Goulburn managing director Gary Helou has said the company will seek to recruit new farmers to increase its milk volumes. Mr McIntosh said milk discounting by Coles and Woolworths since January 2011 had put downward pressure on the price paid to farmers. Before the retailers’ discounting war began, he was paid 50c to 55c a litre for his best milk.
Now he received 47c a litre and, for tier two milk, just 16c a litre, which Mr McIntosh said was “so far below the cost of production it was unsustainable”. This trend was worrying, he said, particularly given his sons were interested in carrying on the family business. “In the current environment, it is very discouraging for young farmers to consider entering the industry,” he said.
He believed the Murray Goulburn Co-operative deal with Coles would involve the higher tier one pricing and that the company was looking at how to manage supply through the year so there was not a surplus of milk in certain seasons. The decision by Murray Goulburn to build a processing plant in Sydney, costing about $60 million, has mollified the concerns of NSW farmers that cheaper milk from Victoria, which normally goes to the export market, could cut their prices. Mr McIntosh said there had been assurances that only NSW milk would be processed in the state.