The decision by Coles to open the farm gate for direct milk supply from farmers in Victoria and southern NSW will not be the saviour of the dairy industry.
While it may lead to an improved relationship between retailers and dairy farmers in the longer term, there has been no promise that $1 litre milk will not return to Coles' fridge.
This direct milk supply arrangement will only be available to a limited number of farmers, as it is clear that Coles will select farmers based on size and location.
For a sustainable future, all dairy farmers need a lift in farm gate prices. The Dairy Committee has the position that enhanced value in the supply chain must deliver a rising tide of farm gate prices across the industry.
Will this new supply arrangement result in more competition and a lift in returns for farmers? The answer is unclear and the NSW Farmers Dairy committee is seeking a meeting with Coles to get more clarity.
Coles have said they will offer a competitive price, but there has been no language to indicate it will be a premium.
There are plenty of questions and farmers should take wise counsel as there is likely to be new and different terms than what they are used to in existing contracts.
These new agreements will need to comply with the mandatory code when it comes into force. Those that are signed off before then cannot be made to comply with the code.
We are hopeful this measure will result in Coles building closer relationships with farmers, and better understanding of the challenges on-farm.
Creating a direct relationship with farmers must make it easier for increases in milk prices to reflect cost of production increases.
Coles must also commit to ensuring that $1 a litre milk never returns to their shelves.
- Erika Chesworth, NSW Farmers Dairy Committee chair