Update: 03/03/2011image expired

Australian farmers have expressed consternation over supermarket Coles’ recent decision to sell its home-brand milk for $1 a litre. The farmers feel that such actions will lead to vastly reduced farmgate prices and a situation wherein farmers will struggle to meet production costs, as is currently happening in the UK and USA.

The decision by Coles sparked a price war between the Australia’s supermarket chains, which has angered dairy farmers and prompted a Senate inquiry. The company say their decision has increased milk sales and deny that their actions were irresponsible.

John Durkan, the company’s merchandising director told a Rural Press Club breakfast in Melbourne that the decision will not hurt farmers and reiterated that Coles’ price cut has boosted milk sales across the country. Durkan said, "The whole milk category has increased, and we're seeing an increase in our own-brand milk sales. There are many other factors that affect farm gate prices outside of what we pay to our processors,"

He also rejected suggestions that the decision will affect prices across the board as he believes the proportion of fresh milk bought from Coles is too small. Durkan told the Press Club "We just don't have the scale of milk that we sell to be able to do that alone."

Nevertheless, Australian dairy farmers are calling for a watchdog or retail industry ombudsman to monitor how prices are set. The vice president of Australian Dairy Farmers, Adrian Drury, said the system needs to be more transparent.

Mr Drury said his organisation are calling for, "Ideas like a retail industry ombudsman, or some sort of price-watching mechanism that could be managed in a commercially-sensitive way."