Tuesday, February 05, 2013

One pint please Mr Milkman

To the lay person, what are we to make of the milk wars? Two major supermarkets are selling milk at very cheap prices and dairy farmers are complaining that they are being hurt by this practice. How can this be? Surely farmers sell their milk at a price and it is up to retail outlets to sell milk at whatever price they want to?

As always, I have a little knowledge, which is surely a dangerous thing.

When I were a lad............yes, very much that sort of post.

My father disappeared for three days after a Victorian Dairy Farmers Association meeting in Melbourne. Mother and Uncle had called the police. I must ask Mother if she knows what happened, but all I can recall was that upon his return Father announced that he had been invited to be president of the VDFA. He was secretary, treasurer and president of various local country sport and school organisations, but I don't think he would have been effective in the above described role as he lacked the political animus. It was as well he declined.

Waffling and reminiscing again. To the point.

We sold our milk to the local co-operative, which in turn collected our milk and paid us, processed and bottled the milk, made cheese etc. It was not just the quantity of milk that was paid for. The butter fat content came into the equation too and this is where my father excelled. He bred our cows to produce very high butter fat milk.  At times we received dividend payments from the co-op as well. With a couple of hundred cleared acres that supported around 90 milking cows, we lived well enough to keep mother in new shoes, something like 65 pair Father counted as he threw them out the door one day when there were budgetary problems.  So, ninety milking cows could support 3 adults and four children reasonably well.

I think if a present day dairy farmer  reads this, they would find that number of cows quite amusing. Dairy herds are now much larger and the collection of milk from the cows very high tech.

I believe in the nineties, dairy farms and milk production was deregulated. Clearly the move had some support by farmers, possibly very large companies that owed numerous farms. Did the government set the price paid to farmers before deregulation? I don't know. I think the government may have set the retail milk price.

Once the milk left the farmer's property, the rest was done by the co-operative, right down to door to door delivery, at times. No doubt grocers and perhaps later, supermarkets took delivery of the milk and paid the price set by the co-op. What was to stop the price of milk rising? Political pressure on the government from consumers, I expect. Milk was a important part of people's diets, more so than now.

So why is it so different now? Nothing I have heard or read, and that it quite a bit, explains it to me in any way I can understand. Why is there such downward pressure on the price a dairy farmer is paid for his product by the price a supermarket sells milk? Where else can a supermarket chain buy its milk from? New Zealand? Do farmers not join together in co-operatives so that they have some power in price negotiations? Perhaps the supermarket giants play one co-op off against another. Why no solidarity? Australia exports the majority of is milk produced overseas in various forms. Does this have a bearing?

Many questions about a complex matter. Surely we want dairy farmers to have sustainable incomes if they supply milk effficiently. There have been calls to not buy the cheap milk, at times adulterated with what is referred to as permeate, a substance I have never heard of until recently, but I think it is just a deceptive name for whey. But if you are poor, or even just cautious with your pennies, why would you pay a higher price for milk than you have to? Such calls to not buy cheap milk are futile.

While other countries could take our export market by selling milk products more cheaply to countries we now sell to, on the face of it to me, there is no alternative for the supply of milk and milk products in Australia to retailers. Have the two giant supermarkets divided and conquered dairy farmers?

21 comments:

  1. Hello Andrew:
    Well, we do not think that we have any expertise whatsoever [not that this usually prevents us from writing something]to enter into this discussion of milk and war. However, all this talk of milk makes our minds wander to Margaret Thatcher who, as Secretary of State for Education stopped the milk allowance in schools. Thatcher the Milk Snatcher...

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    1. JayLa, you have amused me very much with Thatcher the Milk Snatcher. I think school milk at primary schools ceased here in the early seventies, to the relief of many children. As you could imagine, forty degree days and unrefrigerated milk don't go well together.

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  2. Sadly, downward pressure on these food basics creates disasters in the supply chain. Orchards being bulldozed, huge animal factory farms where animal welfare is discarded for the almighty dollar, and imports from countries that spray and fertilise with chemicals we don't allow. Australians should be prepared to pay for the clean ethically locally grown food they consume. We did it in the past (I was a single mother for a long while, and did), and it can be done now.

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    1. Bliss, I find it especially tragic to see our superior oranges rot on the ground while we import inferior tasting ones from the US. The level playing field does not seem very level to me and simple economics tells me something is wrong somewhere. I was heartened to hear a BBC broadcast about the improvement in the welfare of chickens grown for meat around the world. Perhaps from a low base, I feel the treatment of animals raised as food is improving. It would be good to see a leap forward though. I think many in theory are prepared to pay more for clean and green, but when you are faced with double the price, even the most passionate of us start to waver.

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  3. The last time I checked, milk cost about $2.95 or a bundle of 2 for $5.95 (varies) for milk from Australia and can get more expensive since the prices are never fixed. I should make a list and get back to you on it

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    1. Michael, I remember how expensive it was in Malaysia when we were there last year. I can't recall if it was fresh milk, or what we call long life, which does not need refrigeration until it is opened. That would be $2.95 a litre?

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  4. Now I am thinking right back to childhood and wallowing in nostalgia ... I haven't heard of a pint of milk for perhaps 45 years!

    Milk was a VERY important part of people's diets post-war, especially children. So good parents knew, even if they couldn't afford lots of things, that each child had to drink a pint of milk a day - including 1/3 of a pint for free, at school. Remember those little bottles?

    Political pressure on the government from consumers would have been very important back then *nod*.

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    1. Hels, not 45 years ago surely. I am.....hmmm, you are probably right. Indeed I remember the school milk, arriving in a crate. I can now only drink ice cold milk.

      Bit odd to give milk to schools made of dairy farmers' children.

      While their influence is less now, the Country Party had much more clout back then.

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  5. We have the same problem here with the dairy farmers saying that they cannot meet their livestock food bills due to the poor amount they receive for the milk. Many are diversifying by making other products to sell direct to the consumer such as cheese, ice-cream etc. We also have many EU rulings that complicate matters. I don't profess to understand any of it but I do think farmers should receive a fair price for their milk. Now I'll shut up.

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    1. Fun60, that is happening here too where farmers sell directly from the farm I understand you have a new...umm, what is her title? She is overseeing competition between supermarkets and suppliers.

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  6. Coming from a dairy town, I remember that farmers get locked into contracts with the distributors to the big supermarkets.

    Then, when ALL of their milk goes to the big guys, those big guys can then say, "Oh, by the way, we're going to pay you half of what we're paying you this week." The farmer is then trapped: who else is going to buy his milk?

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    1. Kath, is it not a stalemate? It could be 'who is going to supply us with milk then?'. It should be co-ops with contracts to supermarkets, not individual farmers. I suppose that was what deregulation was about.

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  7. I don't even pretend to understand how prices are fixed. All I know is that farmers don't get paid enough, fruit growers are losing their farms because of cheap tasteless imported fruit, the government doesn't believe in subsidising our own growers. Meanwhile those on very low incomes are happy to buy the cheaper milk, bread etc because they have families to feed and it has all become a vicious cycle.

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    1. River, I don't think the government even need to subsidise farmers. What they do need to do is equalise things for farmers when other countries subsidise their farmers.

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  8. Lucky I have to drink soy then :|

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    1. Fen, don't tell me decaf as well?

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    2. I don't drink coffee at all!

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  9. Someone has probably completed a doctoral thesis on the many forms our primary produce markets have taken over the years. I am far too young to remember postwar rationing, but not too young to remember adults complaining that Victorians paid more for Victorian butter than Poms paid for Victorian butter. We were once Mother England's most reliable food supply.

    I do also remember a brouhaha in the early 60s when the price of milk went up to 1 shilling a pint. Regulations were largely designed to smooth out income variations for primary producers, thus ensuring a steady supply.

    Remember when private "dairies" [retail] sold nothing but milk and cream, and "owned" the local milk delivery run?

    I think co-ops were genuine co-ops formed by small farmers when the government decided to free up the market. Eventually, big concerns gobbled up little ones, co-ops were transformed into corporations, and small markets disappeared as supermarkets grew.

    One still passes abandoned milking sheds along the GV Hwy from when [the 90s??] the dairy industry split into two groups - those who tried to survive as part of big business and those who had had enough.

    But Kath is onto something when she says the farmer is trapped. There are few industries where a person's identity, life, home, business and assets are so entangled as on a small dairy farm.
    A cow which can produce milk for another 6 years is worth something - a cow not used becomes an expense in the blink of an eye. No sale, no assets.

    Supermarkets now have access to enough milk to survive any small-holder revolution, and remaining small-holders are between a rock and a hard place. I doubt there is anything any of us can do, for the war is already lost. If we all switched to buying more expensive milk - so long as we buy from supermarkets - the supermarkets would just be scooping the cream off the top. They would have no need to pass the increased income on to dairy farmers.

    This is a rant but not a whinge. It's just the way things have evolved. The success of supermarkets lies in their combined purchasing power, and it affects a lot more than milk. Everything is about volume, turnover and square inches of shelf space.

    Unfortunately, milk was the most obvious product to be used as a sacrificial lamb [pardon the mixed metaphor] in the supermarket price wars.

    Milk is mother, it is a complete food, it is a "necessary" item across all cultures, income levels and age groups. God bless community minded supermarkets, capitalism and competition for ensuring a plentiful supply of this most vital commodity at a good, cheap price. It's enough to make us weep tears of gratitude.

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    1. I had about us selling to Britain, FC. Then they joined the EEC and were no longer interested in what we had to sell.

      I do remember the local dairy that used to process its own milk, but when I was around, it was only a delivery business.

      The co-op we sold too was large and professionally run and it was in the sixties. No sign of it on the net. I think it may have been bought by Murray-Goulburn.

      It is certainly true that being a dairy farmer is whole life identity.

      I believe in unions for workers but it now seems that many farms are big business owned, and so a farmer's collective can not happen.

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  10. It does seem like a very complicated situation, life in general seems more complicated these days. I remember the good old days when the milkman lived next door to us and his milk truck would back out of his driveway at about 4.30am each morning waking everyone up..but I never ran out of milk!

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    1. Life is more complicated now Grace, partly because we know things we never used to know. I am sure the tv news when you were young did not have a stock market report. I would be quite unhappy at being woken at 4.30, milk nearby or not.

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