Milk market scrutiny is intensifying with the NSW parliament poised to start an inquiry into the sustainability of the state’s dairy industry.
The snap move coincides with Queensland federal MP, Llew O'Brien, saying the outcry over farm gate milk payments and $1 a litre milk now warrants consideration of a Royal Commission into the way supermarket chains have controlled the milk market.
His Royal Commission thoughts were strongly applauded in Queensland where the dairy lobby predicted any federal inquiry would see horticulture and other supply chain players eagerly support milk producers with horror stories of predatory pricing and unfair contract strategies employed by big retailers.
The NSW Upper House committee investigation will include looking at the impact of retail power and fresh milk market deregulation 18 years ago.
Hearings in Sydney and rural areas will explore the price influences and nature of relationships in the value chain between farmers, processors, logistics companies and retailers, and the impact of drought, energy and water costs.
In Canberra, federal Agriculture Minister, David Littleproud, has already flagged plans to see the milk market reformed, arguing the current market is clearly not working. He is focused on improving supermarket payment and pricing transparency so farmers get a better share of returns.
Details expanding on current federal government moves for a mandatory code of conduct between farmers and milk processors are likely to be released early next year and include oversight of retail price setting strategies.
Advocacy group Dairy Connect’s chief executive officer, Shaughn Morgan, said the NSW and Queensland industries were caught in a vulnerable edge with little large-scale production of cheese and other dairy lines unlike the wider market options in southern states.
He urged the parliamentary inquiry to question whether the NSW government could bring back a milk marketing board or a dairy commissioner with strong powers of persuasion or industry oversight.
“The ACCC found dairy farmers were wedged firmly at the bottom of the supply chain, unable to recoup lost value,” Mr Morgan said.
“I’d expect the role of all commercial relationships within the dairy value chain be examined.
"Real-time challenges such as energy and water costs and the need for enhanced dairy research and education, also needed reviewing."
Queensland Dairyfarmers’ Organisation executive officer Eric Danzi said his state’s industry would watch NSW’s inquiry closely, welcoming any fresh scrutiny of milk market pricing.
QDO has also backed the idea of a Royal Commission saying processors were privately admitting they could not afford to keep doing business with domestic retailers if the market was not changed.
“We know Lion is selling out of the dairy industry in Australia and I expect Saputo may soon draw the line at close relationships with supermarkets and opt to build its export markets instead,” Mr Danzi said.
“We applaud Llew O’Brien for leading this Royal Commission call. I think it has a realistic chance of happening, and getting support from a lot of other farmers and processors in other sectors.
"Those who deal with these supermarkets are fearful of speaking out about unfair practices, and a Royal Commission would change this oppressive culture.”