End milk price war now: MP

Liberal MP calls for end to milk price war as Senate votes to scrutinise impact of price discounting

By Brad Gardner | February 11, 2011

A parliamentary inquiry will examine supermarkets’ decision to slash milk prices as a Liberal MP warns the dairy industry will suffer if the "discounting war continues".

South Australia Senator Nick Xenophon yesterday gained support to make Coles, Woolworths, Aldi and Franklins front an economics committee to explain their decision to heavily discount the price of the milk.

Prices have fallen to as low as $1 per litre, and the committee will look at what effect this has had on the dairy supply chain.

"Over time these unsustainable prices will lead to our farmers being paid less than the cost of production for their milk, and it will lead to many dairy farmers walking away from the industry," Wannon MP Dan Tehan says.

"I call on both major supermarkets to stop this race to the bottom."

While the dairy industry is predicted to grow in the coming years, Tehan says low prices will instead lead to fewer farmers and jobs for those relying on the sector.

The Economics References Committee will look at what impact supermarkets’ decision has had on wholesale milk prices, production, competition and whether any legislative changes are required.

Coles was the first retailer to discount the price of its home-brand milk, leading to Woolworths, Franklins and Aldi to do the same.

In response to the price cutting, the Western Australian Farmers Federation (WAFarmers) urged consumers to buy branded products.

Coles claims it will absorb the cost of the price reductions, but WAFarmers says the comment "it defies logic" because it will cost the retail giant more than $30 million a year.

"Sometimes deals really are too good to be true, and in this case, the low purchase price of milk and dairy products may have hidden costs and serious repercussions for local industry and future supply of fresh milk," WAFarmers Dairy Section President Peter Evans says.

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