Supermarket giant Woolworths is testing the waters to see if Queenslanders are prepared to pay more for locally-sourced and higher quality milk.
On March 10, 2015 the company launched its Farmers’ Own brand of milk, which is sourced directly from two farms on the Sunshine Coast and sold from Brisbane to Rockhampton.
The scheme enables the farmers to bypass the traditional dairy processors, and gives them more say in how much they are paid for their milk.
Conondale farmer Lucas Kennedy is one of the new suppliers, and said the deal meant he had more negotiating power when setting a price, which is locked in for three years.
“All I can say is Woolworths came to me and said ‘come back to us with a sustainable milk price’. We agreed on a price that I felt we could start working off and put us in a position,” he said.
Mr Kennedy could not disclose how much he was getting paid per litre of milk, but said the deal was better than those offered by the major processors.
Paul Turner, from Woolworths, says the deal is consumer-driven, and is about bringing a premium brand of milk to the market.
“The cows are bred specifically and farmed specifically to make sure we deliver a quality milk, so it attracts a more premium price,” he said.
“It’s only been brought in because we feel there’s a place in the market to have a more premium product, and also to deal more directly with farmers.
“What we try to do in a competitive marketplace is offer consumers a choice, and we were able to source directly, as we already do in produce and meat.”
Queensland is the latest state to introduce the Farmers’ Own brand. Late last year it was also rolled out in New South Wales, following a trial with seven dairy farmers in the Manning Valley.
Only two farms on the Sunshine Coast will supply Farmers’ Own, but Mr Kennedy hoped that number would grow in the next few years.
Mr Turner said the scheme could be expanded to other Queensland dairy regions if shoppers responded well to the product.
“At the moment, our projection on volumes is around five million litres per year and currently the two farms can supply that, [but] as we go forward to the future we’ll look to expansion once we get to a more critical mass,” he said.
“When we are able to get supply out of north Queensland, we will also launch Farmers’ Own into that area as well.
“What the future holds is up to the customer to decide.”
Dairy farmers question supermarket deal
The scheme has its fair share of critics, such as John Cochrane of the Premium Group, a milk bargaining collective that negotiates between farmers and processor Parmalat.
Mr Cochrane has described the Woolworths deal as one that seeks to “divide and conquer” the industry.
“We approached Woolworths and would’ve liked them to have taken milk from all of the Premium group and give some sort of a margin across 200 people,” Mr Cochrane said.
“They’re saying how it [the ‘Farmer’s Own’ milk] is going to grow, I’d be really interested if they would put the figures on the table regarding the growth in New South Wales.
“Show to us how it has grown, and how it has benefitted farmers in New South Wales, and we will come on board.”
Mr Cochrane, who is also an auctioneer, said he is seeing more dairy farming families forced to leave the industry.
He said farmers are disillusioned that farm gate prices have not reflected increased input costs, despite Queensland having a milk deficit.
“When you are 100 million litres of milk short in a market, surely that would drive price,” he said.
“We are searching for markets outside the domestic market, you need to think about overseas somewhere that are prepared to pay us for the quality product we produce.
“We’d love to supply Queensland, but if we stay doing this, we’re going to find it extremely difficult to stay in business.”
In Queensland, about 140 farmers have left the industry since the supermarket milk price war began four years ago.
While Mr Kennedy claimed his arrangement with Woolworths was a positive step for the local dairy industry, he acknowledged that many Queensland farmers continued to be priced out.
“There’s two [local] farms that have just sold their heifers out, so they’ll be getting out in the next six or 12 months,” he said.
“I think for a lot of people it honestly is too late. I think a lot of people, the age they are, the position they’re in, financially, what we’ve put up with for the past four or five years, people just don’t really want to continue on.”
Source: Rural