Farmers not hurt by us: Coles
Coles has defended its move to sell milk cheaper than bottled water, saying there was no reason for processors to slash prices paid to farmers.
The supermarket giant lodged its submission to the Senate committee inquiry into the supermarket milk wars late yesterday, before its appearance next Tuesday.
Coles came under fire from dairy farmers after saying on January 26 it would sell home brand milk for $1 a litre, which Woolworths and smaller retailers matched.
Coles managing director Ian McLeod said the supermarket had increased the price it paid processors since late January and estimated the processors would get a net increase in their contract price.
"In these circumstances, we believe there is no reason why Coles retail milk price reduction should have any impact on the farm gate price," he said.
The submission says there was competition between processors and dairy processor Fonterra was initially reluctant to pass on price increases to WA farmers.
"In mid-January 2011, Fonterra offered Coles a lower price as part of the competitive tender in WA," he said. "In February Coles subsequently offered to pay Fonterra an additional 5¢ a litre if it passed that money directly to dairy farmers in WA.
"Initially Fonterra decided not to pass on this increase to WA dairy farmers but now has agreed to."
Mr McLeod offered confidential commercial contracts to the committee to prove it was not shortchanging farmers or consumer.
He denied Coles was selling milk below cost or had raised petrol or grocery prices to subsidise the milk price cut.
Mr McLeod said the "critical issue" for the dairy farmer was not the retail price but transparency of the farm gate price between farmers and milk price companies.
But WAFarmers dairy section president Peter Evans dismissed much of Coles' claims.
He accused Coles of trying to damage the relationship between farmers and suppliers.
"(Coles) has been trying to split farmers and processors right through this and it's not working," he said.
Fonterra did not comment.
