This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.
You can find the current article at its original source at https://www.theguardian.com/australia-news/2018/oct/24/why-boycotting-supermarket-branded-milk-wont-help-farmers
The article has changed 5 times. There is an RSS feed of changes available.
| Version 0 | Version 1 |
|---|---|
| Why boycotting supermarket-branded milk won't help farmers | Why boycotting supermarket-branded milk won't help farmers |
| (17 days later) | |
| Australia’s agriculture minister, David Littleproud, has called for a boycott of supermarket-branded milk. He is angry about the lack of support for a “milk levy” of 10c a litre wanted by the dairy industry to support drought-stricken farmers. | Australia’s agriculture minister, David Littleproud, has called for a boycott of supermarket-branded milk. He is angry about the lack of support for a “milk levy” of 10c a litre wanted by the dairy industry to support drought-stricken farmers. |
| Fellow National party colleagues have called for nothing less than a royal commission into the supermarkets’ support for farmers. The Nationals leader and deputy prime minister, Michael McCormack, has said he is open to the idea. | Fellow National party colleagues have called for nothing less than a royal commission into the supermarkets’ support for farmers. The Nationals leader and deputy prime minister, Michael McCormack, has said he is open to the idea. |
| Amid intense price competition across many supermarket categories, the price of milk stirs passions like nothing else. But calls to boycott supermarket-branded milk are misguided; and a royal commission would not be money well spent. | Amid intense price competition across many supermarket categories, the price of milk stirs passions like nothing else. But calls to boycott supermarket-branded milk are misguided; and a royal commission would not be money well spent. |
| The widely held belief that supermarkets are hurting dairy farmers by driving down the price of milk is incorrect. It overlooks basic supply-chain dynamics and the findings of the 18-month-long inquiry by the Australian Competition and Consumer Commission, which was ordered by the then federal treasurer Scott Morrison to investigate the low milk prices paid to dairy farmers. | The widely held belief that supermarkets are hurting dairy farmers by driving down the price of milk is incorrect. It overlooks basic supply-chain dynamics and the findings of the 18-month-long inquiry by the Australian Competition and Consumer Commission, which was ordered by the then federal treasurer Scott Morrison to investigate the low milk prices paid to dairy farmers. |
| There are many players within a food supply chain: producers, processors, wholesalers, retailers and consumers. | There are many players within a food supply chain: producers, processors, wholesalers, retailers and consumers. |
| Dairy farmers typically sell their milk to processors, who then sell to supermarkets. There is a relationship between the supermarket and processor, not supermarket and farmer. Whether the supermarket sells a litre of milk at $2, $3 or $4 has no direct relationship on the price the processor pays to the farmer. | Dairy farmers typically sell their milk to processors, who then sell to supermarkets. There is a relationship between the supermarket and processor, not supermarket and farmer. Whether the supermarket sells a litre of milk at $2, $3 or $4 has no direct relationship on the price the processor pays to the farmer. |
| In the words of the final report of the competition watchdog’s dairy inquiry: “The farm-gate price paid to farmers for milk used to fulfil private-label milk contracts is not directly correlated with private-label milk retail prices.” | In the words of the final report of the competition watchdog’s dairy inquiry: “The farm-gate price paid to farmers for milk used to fulfil private-label milk contracts is not directly correlated with private-label milk retail prices.” |
| Blame dairy processors | Blame dairy processors |
| The ACCC’s report identifies a range of market failures owing to bargaining-power imbalances and information asymmetry but these are crucially between dairy farmers and processors. | The ACCC’s report identifies a range of market failures owing to bargaining-power imbalances and information asymmetry but these are crucially between dairy farmers and processors. |
| Dairy farmers’ weak bargaining power means any higher price paid by supermarkets to processors would not necessarily result in higher farm-gate prices. The ACCC report notes that farmers get no more money for the milk that is sold at higher retail prices (such as branded milk). | Dairy farmers’ weak bargaining power means any higher price paid by supermarkets to processors would not necessarily result in higher farm-gate prices. The ACCC report notes that farmers get no more money for the milk that is sold at higher retail prices (such as branded milk). |
| Processors, not supermarkets, set farm-gate prices in response to market conditions (global and domestic demand), at the minimum level required to secure necessary volumes. Farmers are not paid according to the type or value of the end product their milk is used in. They are paid the same price for their raw milk regardless of what brand goes on the container. | Processors, not supermarkets, set farm-gate prices in response to market conditions (global and domestic demand), at the minimum level required to secure necessary volumes. Farmers are not paid according to the type or value of the end product their milk is used in. They are paid the same price for their raw milk regardless of what brand goes on the container. |
| Also blame consumers | Also blame consumers |
| Supermarkets are under pressure to keep food prices low, particularly on staples such as bread, milk and eggs. This is evident from the fact that campaigns to get shoppers to exercise their power as ethical consumers quickly run out of steam. | Supermarkets are under pressure to keep food prices low, particularly on staples such as bread, milk and eggs. This is evident from the fact that campaigns to get shoppers to exercise their power as ethical consumers quickly run out of steam. |
| In April 2016, for example, national attention paid to the plight of dairy farmers led to a campaign encouraging shoppers to leave “supermarket-branded milk” on the shelves. In a single month the supermarket brands’ share of milk sales dropped from 66% to 51%. Then it began to rise again. Within a year it was back to nearly 60%. | In April 2016, for example, national attention paid to the plight of dairy farmers led to a campaign encouraging shoppers to leave “supermarket-branded milk” on the shelves. In a single month the supermarket brands’ share of milk sales dropped from 66% to 51%. Then it began to rise again. Within a year it was back to nearly 60%. |
| Adding to confusion | Adding to confusion |
| While a milk levy to directly help farmers during the drought has many supporters, the disconnect within the supply chain means it is near impossible for retailers to pass the money directly to the intended beneficiaries. That, again, depends on those who buy the milk from the farmers – the processors. | While a milk levy to directly help farmers during the drought has many supporters, the disconnect within the supply chain means it is near impossible for retailers to pass the money directly to the intended beneficiaries. That, again, depends on those who buy the milk from the farmers – the processors. |
| Despite this, and because the ACCC inquiry’s findings have so far done little to dispel myths about the price of milk, retailers including Woolworths have seen it as prudent to embrace the levy idea and publicly demonstrate support for dairy farmers. | Despite this, and because the ACCC inquiry’s findings have so far done little to dispel myths about the price of milk, retailers including Woolworths have seen it as prudent to embrace the levy idea and publicly demonstrate support for dairy farmers. |
| All the additional proceeds from its “Drought Relief” milk go back to the processor Parmalat, who is responsible for distributing the money to suppliers in drought-affected areas. Coles, meanwhile, has slapped a 30c levy on its three-litre milk containers, with the funds going to the Coles drought relief fund. | All the additional proceeds from its “Drought Relief” milk go back to the processor Parmalat, who is responsible for distributing the money to suppliers in drought-affected areas. Coles, meanwhile, has slapped a 30c levy on its three-litre milk containers, with the funds going to the Coles drought relief fund. |
| These measures arguably add to continuing confusion about how the milk market works and the relationship between farm-gate and retail prices. In the court of public opinion the supermarkets probably had no option but to go along with the charade. | These measures arguably add to continuing confusion about how the milk market works and the relationship between farm-gate and retail prices. In the court of public opinion the supermarkets probably had no option but to go along with the charade. |
| A minister for agriculture should know better. | A minister for agriculture should know better. |
| • Gary Mortimer is associate professor in marketing and international business at the Queensland University of Technology | • Gary Mortimer is associate professor in marketing and international business at the Queensland University of Technology |
| Australia news | Australia news |
| The Conversation | The Conversation |
| Milk (drink) | |
| Rural Australia | Rural Australia |
| National party | National party |
| Australian politics | Australian politics |
| Supermarkets | Supermarkets |
| Business (Australia) | Business (Australia) |
| comment | comment |
| Share on Facebook | Share on Facebook |
| Share on Twitter | Share on Twitter |
| Share via Email | Share via Email |
| Share on LinkedIn | Share on LinkedIn |
| Share on Pinterest | Share on Pinterest |
| Share on Google+ | Share on Google+ |
| Share on WhatsApp | Share on WhatsApp |
| Share on Messenger | Share on Messenger |
| Reuse this content | Reuse this content |