Dairy farmers worried at supermarket milk price war

Updated January 27, 2011 10:51:00

Riverina farmers are doubtful that they will not be hurt by a milk price war between Australia's two biggest supermarkets.

Coles and Woolworths have cut brand milk prices by about a third, to about a dollar a litre.

The deputy mayor of Wagga Wagga and Tarcutta farmer Alan Brown said he has already spoken to local dairy producers and they are worried.

"They're receiving between 40 and 44 cents a litre for the milk that the supermarkets are now discounting to a dollar a litre," he said.

"So there's still a fair bit in there for the supermarkets to make their profit.

"But what we usually see in a case like this is the farmer suffers if the supermarket starts serious discounting.

"We remain very suspicious of these large supermarkets when they start this sort of price war as to who actually pays."

Despite reports the companies will absorb the price cut, farmers are sceptical.

The chairman of the Dairy Farmers Co-op Ian Zandstra said there was next to no margin for farmers and producers on generic milk before the latest price cut.

"It will be a very sad situation if this pricing squeeze is sheeted home to the farmer," he said.

"It will make dairy farming very, very tough and in time there will be a supply response from farmers putting their hands up in the air saying 'I am not doing this for this'."

But Riverina dairy farmers are being told they won't be disadvantaged by the price war.

Coles spokesman John Durkan, denies the cost-cutting will hurt producers.

"They will only become unviable for two reasons," he said

"One, if our competitors don't pay the farm gate price and two, if there isn't efficiency in the farming process.

"We can control the first bit, what we pay our farmers. But we can't control the second bit.

"And we are ensuring that we are not going to effect dairy farmers in any way, shape or form."

Topics: retail, business-economics-and-finance, company-news, industry, food-and-beverage, community-and-society, regional, agricultural-prices, agribusiness, rural, livestock, dairy-production, tarcutta-2652, finley-2713, ladysmith-2652, merriwagga-2652, tocumwal-2714, tumut-2720, wagga-wagga-2650

First posted January 27, 2011 09:36:00