FEDERAL Parliament’s milk price inquiry may be reopened two years after Coles sparked a price war with Woolworths by dropping prices for fresh milk to $1 a litre on Australia Day.
Milk processors have lost up to $90 million on wholesale margins and 55 Queensland dairyfarmers have since left the industry.
The Senate inquiry, independent studies and numerous protests have failed to stop the price war involving retailers, processors and farmers.
“Things are not getting any better and (the inquiry) could be opened up in the next few months,” Independent senator Nick Xenophon said.
He said the price cuts by Coles and Woolworths were causing a decline in the industry that could eventually wipe out the fresh milk market and leave consumers with limited choices, such as long-life milk.
“It would mean that consumer tastes have been changed because of the control major retailers have.”
“The Coles song ‘Down, Down’ actually says something like ‘I know what you are doing to me and I have woken up to it’ and I think that’s quite ironic.
“Farmers and processors have worked it out but I don’t know if consumers have.” Further recommendations to the Senate inquiry’s final report were agreed on by him, the Coalition, Greens and Democrats but not the Labor Government.
Farmers and milk processors say the pressure from retailers to reduce prices has led to a significant loss of value in the industry.
The Queensland Dairyfarmers Organisation estimates $220 million has been lost in the past two years.
Coles has defended its position by referring to information compiled by independent analytics company Fresh Logic that shows dairy farm numbers have been falling steadily for the past decade, mostly driven by the deregulation of dairy pricing in 2002.
Coles also insists it has fully funded the lower retail price of milk from its own profit margin.
“Coles understands dairyfarmer angst about the difficult economic environment they are operating in, including a high dollar, fragile global demand and rising input costs,” a Coles spokesman said.
He said Coles had implemented several initiatives to protect farmgate prices and help expand dairyfarmers’ businesses.
Processor Lion declined to comment.
However, its latest full-year results paint a stark picture of the impact on suppliers.
The group’s dairy and drinks division reported a revenue decline of 10.1%, driven in part by the loss of key private- label contracts and deep discounting of white milk.
In its submission to the Senate inquiry, Lion said: “The continuation of $1 per litre house brand pricing will make it less and less viable for the dairy industry to continue delivering fresh white milk.”