Legal threat over milk

Dairy farmers are considering a legal challenge to long-term supply contracts with Brownes as they prepare for a showdown with the leading milk processor.

Farmers made the threat yesterday after revelations in WestBusiness that Brownes was paying a handful of new suppliers up to 10c a litre more for their milk.

They are weighing up contributing to a fighting fund to see if they can break contracts holding them to lower farm gate prices.

Scott River producer Brad Boley spoke out in support of a legal challenge while other farmers feared commenting publicly under the terms of their contracts.

Mr Boley, who produces about 12 million litres a year and is one of Brownes' biggest suppliers, said he was bitterly disappointed that the company's actions.

"I think that we have to look at a class action," he said.

"People are angry. Everyone expected to get a bit more money this year. It didn't come and the right on back of that we found out about the special deals."

Mr Boley said he was being paid 45c/l compared with 55c/l for farmers on special deals. In the case of his family-run dairy it amounted to a discrepancy of $1.2 million a year.

The third-generation dairy farmer said many others who signed contracts with years to run also faced being left millions of dollars out of pocket.

A host of farmers opted for the certainty of long-term supply contracts about two years ago but since then the WA milk supply has dried up, sparking intense competition among the State's three big processors — Brownes, Harvey Fresh and Lion.

Brownes managing director Ben Purcell, who faces a grilling over the issue at meetings with farmers in the South-West today and tomorrow, said he could not comment on the legal threat.

In a sign of the fierce fighting for milk, Mr Purcell said the loss of a farmer producing 6.5 million litres a year to Parmalat-owned Harvey Fresh forced Brownes to offer a handful of farmers a premium price to shore up supply.

Brownes has just started processing $1-a-litre milk for Woolworths stores under a home-brand contract which runs until 2022. In a separate move, Woolworths will deal direct with WA farmers to launch a new milk brand aimed at the top end of the market after the success of a similar venture in NSW.

"We always said that if it was successful in NSW we would look to replicate it in other places," a Woolworths spokesman said.

"The structure of the dairy market in WA means it is a logical place to do it. We think we can get the farmers and we think we can find a processor happy to process the milk for us."

The West Australian

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