Supermarket chain, Coles, will try to directly engage dairy farmers to secure its own milk supply, but the UDV has urged farmers to use caution in signing up for the deal.
UDV president, Paul Mumford, said Coles’ decision could lead to more competitive farm-gate prices which would be good for the industry.
However, he also urged farmers to examine any contract closely to ensure they could maximise their benefits from a deal and to ensure the farm supply curve would fit with Coles’ expectations.
‘‘This is not be a panacea for all the industry’s problems and this move may only be applicable to some farmers.’’
‘‘If this deal suits your farm system, then that’s a good thing.’’
Mr Mumford said there was an issue of trust that Coles may have to overcome, as the supermarket chain had played a leading role in dropping the retail value of milk to $1/litre.
‘‘They were using it a s a price loss leader to get customers through the door.’’
‘‘They may have a lot of work to do to restore trust.’’
Mr Mumford said farmers will be waiting to see what the actual price offer was.
Now that Coles was a direct milk buyer, the company was obliged to engage more with the industry and he hoped that it would also support industry wide initiatives such as codes for animal welfare which had been developed as national models.
The processing industry would also have to adjust to the ‘loss’ of control over a share of the shrinking milk pool.
Mr Mumford said the role of supermarkets in direct buying of milk may be novel in Australia but was already operating in some overseas countries.