Milk has become cheaper for Australian shoppers, but dairy farmers say this could cost them dearly.

This month, Aldi dropped the price of its Farmdale milk by five cents to $1.55 for 1 litre, following identical price drops on Coles’ and Woolworths’ homebrand milk last month.

This marks the first time Australia’s major supermarkets have slashed the price of homebrand milk since 2011, when prices were as low as $1 per litre.

“We know that the price of essential goods has never been more important to Australians, so we remain absolutely committed to delivering the best value for our customers while also supporting our supplier partners by maintaining fair pricing,” an Aldi spokesperson told TND.

“We remain focused on reviewing pricing for the whole dairy category on an ongoing basis.”

Joe Bradley, eastAUSmilk president and Queensland dairy farmer, told TND the supermarket price reductions could lead to another milk price war as other companies reduced their prices in order to compete.

Joe Bradley, pictured with grandson Thomas, fears for the future of Australian dairy farmers. Photo: eastAUSmilk

“The last [milk price war] caused enormous pain and … heaps of farmers walked out the industry simply because [of] the economics of it all,” he said.

“We are hoping like hell this is not that again, because if it is, Australia is going to lose a lot of good dairy farmers.

“If that’s the case … Australia is [becoming a] net importer of dairy products, and we cannot afford to lose one farm, and let alone a heap.”

Dairy industry woes

A report on Australia’s food security released in 2023 found dairy product imports represented the equivalent of 19 per cent of Australian milk production in 2021–22, an increase of 9 per cent since 2006–07.

In 2021–22, Australia’s dairy industry produced around 8.5 billion litres of milk from 1.34 million cows, worth $4.9 billion in farm-gate value. This represented the industry’s lowest figure since at least 1996–97.

Along with factors such as climate change and a decline in export market share, “rising input costs consistently eroding profitability” were partially blamed for the decline.

Although dairy farmers enjoyed relative stability and positive price growth over the past two years, Bradley said average costs for everything from insurance to feed had gone up about 20 per cent.

Australian Dairy Farmers president and Victorian dairy farmer Ben Bennett said while some farmers may be faring better than others, overall the industry was under increasing pressure.

He also pointed out milk was already much cheaper in Australia compared to countries such as New Zealand, where a litre of Woolworths homebrand milk currently costs $2.72 (A$2.46).

“It’s sort of, ‘Down, down, down, let’s beat up the humble dairy farmer,'” Bennett said.

“The number of farmers is, crikey, probably only a quarter of what [there] was 20 years ago … We’re just getting squeezed and squeezed.

“And at the end of the day, working seven days a week, there are better options in life, really, aren’t there?”

Possible distraction tactic

Bradley said it was possible that the new supermarket milk price drops were an attempt to distract from multiple publicity hits.

The Australian Competition and Consumer Commission is taking Coles and Woolworths to court for allegedly duping customers with misleading discount pricing claims, and both supermarket giants have been accused of worsening inflation.

“I wonder is this [the supermarkets’] way of trying to build back a bit of trust [from] consumers, and once again using farmers as the scapegoat?

“I hope I’m wrong, but it certainly smells [like that] to me,” Bradley said.

Supermarkets defend price drops

A Woolworths spokesperson told TND the company was simply passing on a price drop from milk processors.

“Changes in the milk price flow directly into the price we pay our milk processors for our Woolworths brand milk – if the milk price goes up we pay more, and when it goes down we pay less,” they said.

A Coles spokesperson pointed to the company’s direct sourcing model for its homebrand milk introduced in 2019, which made sure Coles provided “fair, competitive and guaranteed farm-gate prices to dairy farmers directly”.

“Through longer-term one-, two- or three-year contracts, farmers are offered greater security of income so that they can invest back into their farms and make them more sustainable,” the Coles spokesperson said.

“Under this model, our direct-sourcing dairy farmers were offered contracts at the beginning of FY24 that covered the years FY24-FY26.

“As a result, the Coles farm-gate price did not change for the FY25 season and the details are available online as advised by the Dairy Code of Conduct.”

But Bennett said lowering the price of homebrand milk would encourage other brands to do the same, putting widespread pressure on dairy farmers.