Shoppers have been told the cost of milk could rise in the coming weeks as farmers push for an increase in prices due to the Middle East war.
Dairy farmers have been urging supermarket giants to lift the price of milk by at least 20 per cent a litre, to almost $2, warning failure to do so may lead to potential shortages as higher diesel, fertiliser and transport costs threaten to shut production.
According to the ABC, Woolworths said it would pay an extra 10 cents per litre to its farmers who supply for the supermarket’s Farmers’ Own Brand.
A spokesperson for the supermarket could not confirm this to news.com.au but said it was “working to find the right path through” with suppliers, farmers and transport partners.
“We know Aussie households are feeling real pressure when it comes to rising costs and fuel prices. We’re committed to doing what we can to buffer customers at the checkout and absorbing some of those extra costs in our supply chains,” a statement read.
While Lactalis, Australia’s largest dairy company, announced on Wednesday it will pay an extra five centres a litre to its some 800 farmer-suppliers from May 1 to help offset the soaring cost of fuel and fertiliser prices.
Norco, a dairy cooperative, is also set to increase its prices for its 190 dairy farms in NSW and Queensland. The details will be announced after a board meeting later this month.
While a Coles spokesperson told news.com.au it would continue to support its suppliers while trying to provide value for their customers.
The Middle East war, which is nearing the end of the seventh week and shows no signs of ending, has sent the price of fuel and other critical supplies soaring as the Strait of Hormuz, a critical waterway the world uses for oil and trade, remains restricted.
According to the Australian Institute of Petroleum, the average regional price for diesel has risen to $3.20, up six cents on the week before.
Elsewhere, about 60 per cent of Australia’s urea – the most widely used nitrogen fertiliser – is sourced from the Middle East. But supply has been cut off to the world for weeks now, meaning local farmers are forking out high prices amid shortage and demand.
While the transport industry has also been smashed, a recent survey found 70 per cent of truck operators fear they will go under if the fuel crisis lasts six months.
All this led dairy farmers to push for the price of milk to rise by at least 20 per cent to about $2 a litre to ensure they can cover their costs and to continue operations.
“It has the potential to be an absolute disaster. Every farmer I talk to at the moment is making a loss,” one farmer told 7News.
In recent weeks, some dairy farmers in New South Wales and Queensland have already been forced to cut back on milk production, causing a ripple effect through the supply chain.
Others have also decided to use less fertiliser, which impacts pasture production and how many cows that can actually be milked.
“I talked to another farmer today who’s talking about putting off staff, maybe reducing a hundred cows,” dairy farmer Tim Bale told ABC News.
“They [dairy farmers] need confidence … if I kept going with the same normal fuel, normal fertiliser I use, it would probably take out my profit this year.”
Farmers say it could lead to shortages of milk and dairy products like cheese and butter.
Coles and Woolworths branded full cream milk is currently being sold for $1.60 a litre, which the dairy industry previously said is unsustainable.
Supermarkets have reportedly pushed back against the idea of raising the price to almost $2 a litre, saying customers are already struggling with high costs at the checkout.
News.com.au has contacted Coles and Woolworths for comment.
It comes just days after eastAUSmilk, the industry organisation representing dairy farmers on the east coast, called for a rise of 30 cents per litre of milk.
Mr Bale insisted shoppers would still buy dairy products even if the price increased.
“The feedback from most consumers is that if farmers got some of it or the bulk of it, they’d be very happy to pay more and would still continue to buy milk,” the farmer said.
“We just want a fair price.”
Australia’s milk production has declined to about 8 billion litres a year, much less than that of farmers in New Zealand at 21 billion litres.
