While the nation lights its barbeques and toasts Australia Day this week, dairy farmers will be noting the one-year anniversary of the brutal retail milk price war, and its disastrous impacts over the last 12 months, on top of the severe impacts from natural disasters which savaged all Queensland dairying regions last year.

QDO President Brian Tessmann said that it was on Australia Day last year that Coles announced it was slashing its supermarket brand milk to $1/litre, delivering news that farmers saw as an ultimate un-Australian act, especially in the face of devastating flooding for dairy farming families, closely followed by Cyclone Yasi.

The announcement also dragged other retailers into the battle, devaluing fresh milk overnight across the nation, with the price war still continuing one year later.

“We said it then and it remains the case now – these price cuts and marketing tactics would come at the expense of dairy farmers, especially in States such as Queensland, where the vast majority of our milk is produced specially for domestic fresh milk consumption,” Mr Tessmann said.

“The resulting impact has already cost our industry many millions of dollars as processors brands have lost market share to supermarket discounted brands, as well as processors being forced to reduce price of their brands and spend more funding on promotion in an attempt to reduce the loss of market share.

From this, processors’ ability to pay dairy farmers a sustainable price has been undermined.

“Worst of all over the last year we have seen some 30 dairy farmers exit the Queensland industry. Currently new contract negotiations between farmers and processors are under extreme pressure, with lower prices being offered to farmers, as the impacts of the milk war continue to mount.”

Mr Tessmann said it makes no sense that when we are short of milk, retailers would drop the price.

“It is a clear case of market failure. This year had been a very testing time for the industry being dealt blow after blow, but farmers had been patient with an exhaustive Senate Inquiry process.

“Unfortunately, the Government has failed to take action on the report to date and we are still seeking a response. In particular we want them to respond to the sensible recommendations put forward in the minority report tabled by Senators Xenophon, Williams, Heffernan, Madigan and Milne.”

Mr Tessmann added that the dairy industry had put forward sensible and realistic recommendations to address the current problems. “We now need the Federal Government to work with the dairy industry to have these recommendations put into action as soon as possible.”

The recommendations include:

• a mandatory whole of supply chain code of conduct, headed by an Ombudsman or Commissioner that can enforce the code, and ensure that contracts, prices and supply conditions are not unsustainable, 
• strengthening the Competition and Consumer Act 2010 to prevent predatory pricing and deceptive and misleading conduct including that:
  - a definition of unconscionable conduct be inserted into the Act;
  - an ‘effects’ test be reintroduced; and
  - a statutory duty of good faith be enacted as part of the Act. 
• for the ACCC to use its price monitoring powers under the Competition and Consumer Act 2010 to monitor prices, costs and profits relating to the supply of drinking milk and marketing tactics used by major supermarkets over an extended period of time. And for the Senate Economics References Committee to examine this information annually for at least five years.