Consumer group questions whether extra funds from branded milk reaches farmers

But despite the well-intentioned extra spending of Australian consumers, the consumer advocate said there is "no guarantee this will be passed on to farmers".

The dairy industry reached crisis point in April this year, when Murray Goulburn, responsible for processing a third of Australia's milk, and New Zealand giant Fonterra retrospectively cut the prices they paid farmers by about 10 per cent.

It has since been revealed the company was making sizeable losses before the decision to slash prices.

The crisis has prompted calls from farmers and community groups alike to boycott $1-a-litre private label supermarket fresh milk and instead purchase branded dairy products.

Since May, sales of $1 private label milk have fallen from 63.3 per cent of sales by volume to 50 per cent, as consumers have shifted to purchasing branded milk at an average retail price of $1.92 a litre.

"While consumers have poured so much into branded milk products, processors like Murray Goulburn, Fonterra, Lion and Parmalat have offered no guarantee that they will pass on the windfall to farmers," said Choice head of media Tom Godfrey.

"Currently, whether you purchase private label milk or branded milk such as Dairy Farmers or Pauls, the farmer receives the same price per litre from the processor." 

Choice has called on all milk processors to confirm whether farmers were benefiting from the increased sale of branded dairy products.

"Buy Australian dairy products irrespective of brand. Buy branded milk if your budget allows, but if not, buy private label milk, rather than no milk at all," Mr Godfrey said.

A spokesman for Murray Goulburn said its farmers were directly benefiting from the public response.

"Murray Goulburn does not retain earnings and passes on profits to its farmer-suppliers via our farm gate milk price."

He said "a small portion" of the company's profits, 3.5 per cent, were distributed as dividends to shareholders and unitholders, 66 per cent of whom are also suppliers.

Lion, recognised for milk labels like Dairy Farmers, Pura and The Complete Dairy, said it did not pay a different price for milk used for branded rather than private label milk.

"As Lion is predominately a branded dairy business, we pay our farmers a premium on their milk price, regardless of what products we manufacture from that milk," a Lion spokeswoman said.

President of Australian Dairy Farmers David Basham​ rejected the assertion extra funds from branded milk were not passed on to farmers.

"Clear examples are both Murray Goulburn and Norco, they are both co-operatives, so any profit the business makes goes back to shareholders," he said.

"As a co-operative farmers do have control ... but they can't just rely on the co-operative itself telling them the message, they do have to test that outside to make sure it is accurate."

Mr Basham said there were "good indications" the global milk market may be slowly starting to rise, with the Global Dairy Trade Price index rising 12.7 per cent overnight, to an average price of $US2731.

In the aftermath of the farm gate price cut, online retailer Aussie Farmers Direct reported a 40 per cent surge in telephone inquiries and a doubling in website traffic.

Aussie Farmers Direct buys milk from smaller dairy processors such as Camperdown Dairy and Norco, which produce primarily for domestic fresh milk, as opposed to global milk powder.

"These processors pay their farmers a premium for fresh drinking milk, and Aussie Farmers Direct in turn reflects that premium in the price it pays to those processors," said Aussie Farmers Direct spokesman Jim Cooper.

The discussion comes one day after South Australian independent senator Nick Xenophon​ proposed the government consider reinstating a national school milk program to help the struggling dairy industry.

Deputy Prime Minister Barnaby Joyce will host a dairy symposium later this month to consider solutions to the milk industry crisis, following a meeting with Murray Goulburn executives on Tuesday.