Dairy farmers face ruin amid supermarket milk war

Dairy farmers say they are struggling to survive as major supermarkets wage a milk war offering prices as low as $1 a litre.

With the industry gripped by crisis, 500 dairy farmers and local business people flocked to a meeting in Tongala, in northern Victoria, on Wednesday to try and work out a way to challenge the huge chains.

They came in the hope of finding some answers from politicians and business leaders.

Businessman Dick Smith, Nationals Senate leader Barnaby Joyce and Independent MP Bob Katter were among the speakers.

"Milk is cheaper than water, we have to do something about it," Senator Joyce told the crowd.

Dairy farmer Pete Middlebrook is one of those whose livelihood is under threat because he is selling milk at just 35 cents a litre.

"For the sake of the consumer, paying an extra 10 to 15 cents a litre, that's all we need. Ten to 15 cents litre on all our domestic milk and it's a simple solution, but no one's got enough guts," he said.

Fellow dairy farmer, 48-year-old Nigel Hicks says he is selling his milk for even less.

"At the moment the milk price we've been getting is 25 or 26 cents a litre. The cost of production does vary from farm to farm, but for us it's around 43 cents a litre," he said.

He has increased his borrowings from the bank to stay afloat, but he cannot make the farm pay.

At sunrise and sunset seven days a week, Mr Hicks brings his cows in to be milked.

Three days a week he works a 20-hour day, milking his 150 cows morning and night as well as working on a neighbouring farm to get some cash income.

"The days I'm working off farm it's a 3:30 in morning start, then I get home at 11:00 most nights," he said.

He has worked in the dairy industry for 30 years and survived the decade-long drought.

But he says today things are tougher than ever.

There are now 6,700 dairy farmers in Australia, down from almost 12,000 just over a decade ago.

'Slow cancer'

Coles says the milk war is not to blame for lower prices.

Mr Hicks says he has watched many neighbouring farmers shut the farm gate for the last time.

"Just in this block there were 12 or 13 farms. [It's] down to three now. It's like a slow cancer eating away, before long we won't be here," he said.

Down the road, Phil and Tania McKenna have put their dairy farm on the market.

The McKennas cannot see a future for them or their two boys in dairying.

For Mr McKenna, a fourth generation dairy farmer, it is a bitter pill.

"In our situation, we've built what we've got over generations. We keep chewing up our equity. We can't go back to the bank all the time," he said.

"There comes a time when you've got to stop. That's why we're getting out because I don't want to walk away with nothing."

The McKennas battled through the drought by borrowing money against the farm, then they were hit by last year's flood, losing newly planted crops and equipment.

In recent years, the cost of buying fuel, feed, water and power have skyrocketed.

Tania McKenna says when their milk cheque comes in on the 15th of each month, the phone starts ringing with businesses keen to be paid.

"The phone will ring: 'Are you able to pay off that bill this month?' You get to the point I just don't want to answer it," she said.

Two years ago Coles discounted its home brand milk to $1 a litre.

Its decision sparked a milk war as the other supermarket chains followed suit.

Farmers claim that has driven down the farm gate milk price, especially in Queensland, New South Wales and Western Australia, where most of Australia's drinking milk is produced.

Peak industry group, Australian Dairy Farmers, says it has been lobbying supermarkets to lift the retail price.

But Coles argues the milk war is not to blame, launching an online PR campaign two weeks ago, painting theirs as a small role in the bigger picture.

They say they only buy 4 per cent of the total milk produced in Australia and much more is exported, where the high Australian dollar is having an impact.

However, Coles actually buys 20 per cent of the total volume of white milk produced for the domestic market.

Dairy Farmers president Noel Campbell says Coles' spin is misleading.

"Part of the reason why people are so angry with the Coles situation is, whether you supply domestic or the export market, people think milk being sold for $1 a litre is just wrong," he said.

"The amount of capital expended on farm, the amount of labour expended on the farm, long hours etcetera, people just see it as a slap in the face."

Coles is owned by Wesfarmers, a company that began life as a farmers co-operative.

It declined 7.30's request for an interview, saying none of its executives were available.

Election issue?

Farmers attending the meeting in northern Victoria on Wednesday have formed a protest group, called Farmer Power.

The group says it is prepared to blockade supermarkets to highlight the retailers' chase for profits at the expense of primary industries.

One of Farmer Power's demands is a possible return to a floor price for domestic milk.

Independent MP Bob Katter says when the industry was deregulated the price went from 57 cents to 42 cents a litre overnight.

In an election year, the discontent in the industry has been a lightning rod for politicians competing for votes in the bush.

"Are any of those things going to change if you keep voting the way you've been voting? No they won't change," Mr Katter told the crowd at Tongala.

But for Phil McKenna, the meeting came too late.

After four generations of dairying he is devastated to be at the end of the line, but he has maintained a sense of humour.

"My great great-grandfather was the first one out from Ireland here in Nathalia. He was the sanitary disposal man in there," he said.

"I said to my Mum: 'It's ironic but we started in the shit and now we're finishing in it'."

Source: ABC News, 14 February 2013