WORRYING: Coles has announced it will begin sourcing milk directly from dairy farmers, cutting out dairy processors. But farmers aren't convinced this is a positive step.
WORRYING: Coles has announced it will begin sourcing milk directly from dairy farmers, cutting out dairy processors. But farmers aren't convinced this is a positive step. ALI KUCHEL

Coles to source milk directly, but farmers aren't convinced

DAIRY farmers are concerned by supermarket giant Coles' announcement it will begin sourcing milk direct from farmers, despite the company claiming it will provide fair prices.

Coles will next month begin sourcing milk directly from farmers in Victoria and southern and central New South Wales and said it would provide farmers "fair and competitive" farmgate prices and improved certainty of income.

But Clarendon dairy farmer Errol Gerber isn't convinced.

"I'm concerned - basically it is Coles capturing the market and having control over the market place," Mr Gerber said.

Clarendon dairyfarmer Errol Gerber, Gerber Farms.
Clarendon dairyfarmer Errol Gerber, Gerber Farms. ALI KUCHEL


He said the move would be "detrimental" and would maintain an artificial price ceiling in the dairy industry.

"They say they will pay farmers a competitive price, but they were the first ones that started with the dollar-a-litre milk, and they were the last ones to move with the 10c/L rise," he said.

"I'm very suspicious of their long term genuineness, they've shown all the way through they're not really genuine in seeing farmers receiving a proper price."

Coles Chief Operating Officer Greg Davis said Coles was proud to be collaborating directly with Australian dairy farmers to purchase their milk and strengthening the sustainability and long-term resilience of dairy farm suppliers.

"In addition to offering a fair and competitive price, dairy farmers will have more choice regarding the length of contract and more certainty around income," Mr Davis said.

"Over many years, Coles has developed direct relationships with thousands of meat, seafood and fresh produce farmers supplying to our stores; it is a successful model, and we think it can work in dairy too."

Coles will also offer farmers contracts with guaranteed prices for two years and a floor price in the third year with flexible options of supply.

But Mr Gerber wasn't convinced the long-term contracts would be benefit.

"Some individual farmers may do well out of it, but overall is the industry going to benefit - I don't think so," he said. "They're not going to be pushing the price forward ... they're going to be maintaining a downward pressure."

Industry body Australian Dairy Farmers released a statement welcoming any move for more transparency in the dairy supply chain.

"We are hopeful that Coles will use this measure to build closer relationships with farmers, but we are seeking further engagement on how the initiative will work," the statement said.

However, it also said Coles needed to commit to ensure $1/L milk never returned to its shelves.

"The most unsustainable part of the dairy industry is the lack of value being returned to farmers through the domestic market," the statement said. "It is imperative that value is delivered through the supply chain, with farmers receiving their fair share for the hard work, risk and investment that they have in this industry.

"This includes farmers securing their fair share of future retail price increases across the dairy cabinet."

Coles will pay Canadian based dairy processor Saputo to process and bottle the milk it sources under a toll processing agreement.