Coles will pay major milk processor Harvey Fresh more for its milk on the condition it increases the price it pays to WA dairy farmers.
Coles merchandise director John Durkan said Coles would pay Harvey Fresh an extra 3.3c a litre for private and homebrand milk.
"Coles expects the cost price increase to Harvey Fresh to be passed on to all of their milk producers at the farm gate," he said.
"The actual payment made by Harvey Fresh to its milk producers will depend on the quality and quantity of the milk that they provide but this is a strong sign that retailers and dairy processors recognise the need for farm gate prices to rise in the current environment."
Harvey Fresh has the contract to supply Coles with its $1/litre homebrand milk.
WAFarmers president Dale Park flagged the prospect of price increases for Harvey Fresh more than two weeks ago.
Mr Durkan said Coles had met the WAFarmers Federation to discuss the future of the industry.
"Following our discussion with WAFarmers, Coles has also commissioned work by a consultant expert, Fresh Logic, to provide greater transparency about pricing in the WA supply chain," he said.
Coles spokesman Jim Cooper said the cost of homebrand milk would not be increased, but negotiations were still continuing as to whether Harvey Fresh ’branded’ milk would be subject to a price increase.
WAFarmers dairy section vice-president Phil DiPiazzi said the price increase was welcome news, but called on Harvey Fresh to pass the full amount on to farmers.
"We’d be hoping they would be passing on all the gains to farmers who are desperately in need of increase in the price of their milk, it’s a positive and WA farmers have been working hard (to achieve)," he said.
"We’ve had meetings with Coles and Wesfarmers and argued the price of milk is unsustainable and it’s excellent they are taking notice."Harvey Fresh suppliers receive now receive about 41c a litre for milk, but needed about 50c a litre to be sustainable.
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