Price is right at the dairy

Norco chairman Greg McNamara at his family dairy farm at Goolmangar. In a win-win situation dairy product retail prices have fallen while returns to farmers had increased.

THE cost of milk last year took its biggest retail drop in 37 years.

This was on the back of a one per cent fall in all dairy products, the biggest drop since 1973, according to CommSec chief economist Craig James.

The usual trend sees dairy prices increase by between one and 10pc each year.

Norco chairman Greg McNamara said while retail prices might have dropped, the returns to farmers had increased and that too was good news.

Last year, Norco paid dairy farmers an average of 57 cents per litre, the highest price on record.

“It was a good year,” Mr McNamara said.

It’s a price trend he predicts will continue for the next few years.

Mr McNamara said his farm at Goolmangar, which has been in the family for eight generations and runs 300 dairy cows, experienced eight years of operating at below-cost production.

In 2000, after the dairy industry was deregulated, the milk price dropped to as low as 37 cents a litre. It stayed low for seven years.

Mr McNamara blamed the low milk price on domination of the industry by a small number of milk processors which supply milk to the two major supermarket chains, Coles and Woolworths.

“Government feels consumers have been served well by having cheap foods,” Mr McNamara said.

However, the supplier must also get a fair price for what they produce, but that ‘doesn’t happen,’ he said.

“The ACCC (Australian Competition and Consumer Commissions) neglects what is conscionable conduct,” Mr McNamara said.

CommSec is attributing the drop in dairy prices to lower transport costs and the removal of the fresh milk levy.