Dairy industry sceptical of Labor's plan to regulate milk price

About 400 delegates were in town to hear Labor make a bold move this morning, announcing that a future Labor government would instruct the Australian Consumer and Competition Commission  to create a scheme to set a minimum floor price for farmgate milk sales.

Lots of dairy producers and processors discussed the issue around the conference coffee urn, and most were convinced Labor had left itself wriggle room to back out of the plan on the ACCC's advice, which they assumed would lean towards a free market solution.

Not so, Mr Fitzgibbon said.

"We will direct the ACCC to assess, test and design a scheme. We'll be making it clear, we don't want to hear why it's difficult , we want to hear how we best make it work," Mr Fitzgibbon said.

Australian Dairy Farmers director John Versteden, who runs a dairy in west Gippsland, Victoria, said a floor price in milk is not enough on its own to ensure farmers remained economically viable.

Power prices, a stagnant retail market, low producer returns, input costs up more than 100 per cent and three years of drought also need to be addressed.

"We will need lots of discussions about a whole range of measures to make the industry sustainable," Mr Versteden said.

He is also concerned that a floor price would impact the competitiveness of exports.

"We are still in a global market," Mr Versteden said.

A milk floor price could be a game-changer for processors, who buy from farmers and sell the retailers.

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Fonterra Australia managing director René Dedoncker was surprised to learn of Labor's plan this morning.

"Regulation is a serious challenge and could change the face of the industry and not necessarily for the good," Mr Dedonecker said.

"My initial reaction was 'it's too hard, regulation is always bad'." 

But after discussing the plans with Mr Fitzgibbon, Mr Dedoncker said he was heartened to hear Labor's focus would be to rebuild confidence in the industry.

"That was good to hear, and if it is going to work we'll need lots of discussions with the right people around the table," he said.

Dairy Connect chief executive Shaughn Morgan welcomed the federal focus on the industry, but said he would hold judgement until more detail emerged.

"The devil is always in the detail. We will welcome the attention on this issue, which acknowledges the market failure of the Australian dairy industry," he said.

The National Farmers Federation will await to assess the scheme. NFF president Fiona Simson is particularly keen to understand the impact of a floor price on exports.

"As an export dependent industry, that exports two thirds of what we produce, prices for Australian agricultural products are largely determined by international market forces," Ms Simson said.

"We'd be really interested to see if and how a regulated floor price might enhance the dairy sector's global competitiveness." 

Agriculture Minister David Littleproud dismissed Labor's floor price as a stunt that had already been dismissed earlier in the year by the Australian Competition and Consumer Commission, in it's review of milk prices.

"It's a cruel hoax to try and politicise the issue," Mr Littleproud said.