It comes after reports of processors blaming their private-label milk contracts with supermarkets for the low prices offered to farmers.
ACCC’s Dairy Inquiry discovered that almost all contracts for the supply of private label milk allow processors to pass-through movements in farm gate prices to supermarkets.
The consumer watchdog said that farmers are being paid the same price irregardless of whether their milk goes to private labels or branded products, based on evidences provided by supermarkets and processors.
“Dairy processors need to be honest with farmers. We have written to a number of processors warning them not to mislead farmers by blaming private label milk contracts for the prices offered for milk at the farmgate,” ACCC chairman Rod Sims said.
“We’re concerned this is misleading as the power lies with processors to raise the farmgate price paid to farmers, and then pass these higher farmgate prices on to supermarkets. Almost all contracts between processors and supermarkets for the supply of private label milk allow processors to pass-through movements in farmgate prices to supermarkets. This means processors set their farmgate prices independent of the supermarkets’ retail prices.”
ACCC said there were reports that several dairy farmers in NSW and Queensland are struggling to cover costs due to drought conditions. These reports allegedly claims that processors said they cannot pay farmers more for their milk because of the low A$1 per litre price for private label milk.