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Queensland and New South Wales dairy farmers say they are devastated major supermarkets have not passed on recent increases in milk prices.
Last month, Coles, Woolworths and Aldi increased the price of their home brand milk products from $1.10 to $1.20 per litre.
But unlike the price increase earlier in the year, last month's extra 10 cents did not go to farmers.
Dairy farmer losing money every day
David Janke, who milks 320 dairy cows near Toowoomba in southern Queensland, said it was disappointing last month's extra 10 cents a litre did not go to farmers.
"Because if they're saying they need to cover some of their costs now and make some profit, they haven't worried the last eight years [selling dollar-a-litre milk as a loss-leader] and also they're making millions of dollars of profit," Mr Janke said.
"Farmers are losing money drastically every day of the week now and they're keeping it just to make millions [of dollars] of profits.
"I've got farmers talking to me saying, 'What's going to happen? We haven't got long left in the industry'."
Mr Janke said last month when he pleaded for supermarkets to increase the price of milk, that if things did not improve, he himself would have to leave the industry by the end of the year.
A month on with no change, Mr Janke has begun selling some of his cattle.
"It's an operation we've built over the years and now only because of the price we're receiving we might have to walk away from it."
Drought holding farmers back
The only thing that Mr Janke said could keep him going through this drought was a 40-cents-per-litre price increase at the farm gate, to help cover high feed costs.
"If milk prices come to what we're suggesting [$1 per litre at the farm gate] we would be still be viable because thankfully there is a crop in Victoria and South Australia," Mr Janke said.
"So even though we've still got high input costs, there is going to be fodder available and the price increase would allow us to buy that feed [without losing money]."
Mr Janke explained it was only this year because of the drought and high input costs that he had gone backwards financially.
'Why is it so hard?'
Fellow Queensland dairy farmer Scott Priebbenow said he had 10 weeks of feed left for his cattle and if prices did not increase in that time, he would not be able to afford to buy in any more feed, forcing him to sell his herd.
"It's pretty hard work getting out of bed and thinking, 'Well, what happens after the few weeks of feed left and if you can source it, how do you actually pay for it', because we're just simply not getting enough money for our milk," Mr Priebbenow said.
"Our costs are nearly a dollar a litre and we're getting about 65 cents per litre and it just does your head in, especially when … consumers want to help us, everyone says we want to give you more for your milk," he said.
"So why's it so hard if people want to do it? Why?
"If we don't get a price rise, a decent price, we'll be out and we'll be looking for a job.
"But the simple thing is, give us the extra 40 cents [per litre at the farm gate] and there's hay down south, we know we can source it, we just can't afford it."
Mr Priebbenow said supermarkets had proven it was simple to lift the price and pass the increase onto farmers.
"They did it in February," he said.
"And if they can lift the price to help themselves out, then surely, they've got no problem with lifting the price to get us through."
Where is the extra money going?
Coles, Woolworths and Aldi were contacted for interviews with the ABC but declined.
However all three companies provided statements to this question: Why is the extra 10 cent increase (from July) not going to farmers?
Woolworths said in its written statement:
Aldi said:
A spokesperson for Coles said in a written statement:
Minister wants increases for farmers
Federal Agriculture Minister Bridget McKenzie said she would like to see supermarkets pass on milk price increases to dairy farmers.
"It's not OK [that supermarkets aren't passing on the price increase], I want to see greater returns to the farm gate," she said.
"Dairy farmers are doing it tough at the moment and to see our retailers choose not to pass on price rises is really, really tough in this environment.
"I was at Bangalara Dairies [in New South Wales] last week and met with a lot of producers … and I heard the importance of Norco as the big dairy cooperative, they [Norco] really led the charge and called the supermarkets out and got [a higher price].
"But it's up now for the rest of the processors to actually have that conversation with the retailers on behalf of their suppliers."
Moral obligation vs legal obligation
Mick Keogh, deputy chairman of the Australian Competition and Consumer Commission (ACCC), said supermarkets were doing anything wrong by not passing on price increases.
He said it was the processors that actually paid the farmer and negotiated prices with supermarkets.
"The mechanisms are there [for supermarkets to increase milk prices and pass that onto farmers] and it can happen as they have proven, but it's obviously a commercial decision that those parties make — there are not competition issues that would elicit the interest of the ACCC," he said.
Mr Keogh said supermarkets had no legal obligation to help Queensland dairy farmers through the drought, even if it meant saving the industry from collapse.
Mr Keogh said as part of the ACCC's investigation into the dairy industry it examined 16 supply contracts between processors and supermarkets.
"All of them contained a farmgate milk pass through mechanism — so in other words — if the processor had to pay more at the farm gate to secure the volume of milk they needed for that contract — that was automatically passed through to the retailer in terms of the price they paid," he said.
Are processors passing on price increases to farmers?
The ABC contacted three of the major dairy processors in Queensland and New South Wales to get comment on whether or not they are passing on price increases to farmers.
All three declined to be interviewed, but provided written statements.
A spokeswoman for Lion Dairy and Drinks said:
Dairy co-operative Norco declined an interview, however interim chief executive officer Greg McNamara offered a statement on Norco's position.
Lactalis Australia [formerly Parmalat] declined to comment on either the supermarket milk price or the price it is paying its suppliers.
'We are prisoners and nobody cares'
The head of a collective bargaining group has criticised the major supermarkets for holding onto their recent price increases.
The Premium Milk Group represents about 150 Lactalis Australia suppliers in northern New South Wales and Queensland.
The French dairy giant holds contracts with Woolworths and Aldi to supply it with milk for its home brand range.
Premium Milk chairman Peter Jervis said he had been inundated with calls from farmers in the group desperate for that extra price increase.
"I've had more phone calls in the last month than I've had in the previous 12 years I've been on Premium because farmers are absolutely desperate, they're hanging on by their fingernails," he said.
"They want to stay in the business and they're doing everything they can do it but no-one is listening to their cries.
"I know of farms who've drawn down on their superannuation funds and in some instances they've got a wife who's teaching and they've drawn on her superfund to feed the cows.
"And I said to them, 'Don't do that because in the end you'll end up with nothing because no-one cares'.
"I don't blame the consumers because I think many of them would willingly pay more, but we don't have the ability to get that."
Mr Jervis said that the Premium Milk Group contract with Lactalis expires on December 31, 2019 and he understood Lactalis' contract with Woolworths for its home brand milk expired on August 31, 2019.
"We are seeking a substantial increase in returns to the farmer because costs have escalated to such a degree that's very difficult, well it's nigh on impossible, to stay in the black," he said.
Consumers presumed milk price increase was for farmers
While none of the three major supermarkets promised the price increase in July would be passed on to farmers, many consumers presumed it would be because the increase earlier in the year was.
Lorna from Toowoomba told the ABC she was "extremely disappointed" that supermarkets were not passing on the increase to farmers.
"I'm happy to pay the extra if I knew it was going to the farmers," she said.
"They need that extra money so they can provide everyone with these products.
"We need to support our farmers no matter what. We don't want to be buying long life milk … we want the fresh stuff."
Queensland beef producer Gavin said he thought the price increase was for farmers.
"I hope it is getting to the farm gate," he said.
Darryl, a resident in Toowoomba, said he would also happily pay more to help farmers through the drought.
"They [supermarkets] told us it's going to the drought, so the increase should all go to the farmers," he said.
"The price doesn't really bother me if you know it's going to help farmers in the drought."
