Woolworths to SCRAP farmers' milk levy - so will the price of milk change?

Woolworths will scrap a 10-cent milk levy for dairy farmers at the end of the financial year.

The levy, which has been active since 2018, will end at the end of June 2022 due to eased drought conditions.

Woolworths informed milk processors Fonterra, Lactalis and Bega on Friday to advise them the levy on its own-brand two and three litre fresh milk would be scrapped.

It means the supermarket will stop paying the 10-cent per litre levy to processors from July. The supermarket will also remove the levy label from its own branded milk from March.

Woolworths dairy director Jason McQuaid said in the letter milk prices have increased by around 15 per cent since 2018.

"From the beginning of the new milk year in July 2022, the farmgate price will continue to be reviewed by processors in line with their usual practices,” Mr McQuaid said.

At this stage, it's not known exactly how this will affect milk prices for shoppers as negotiations won't begin until the beginning of the next financial year.

People queuing at Woolworths at West Torrens in Adelaide, Australia.
People outside a Woolworths in Adelaide. Woolies said it will be scrapping a 10-cent dairy levy. Source: Getty Images

Distress among dairy farmers during drought

Dairy farmers have often spoken about their anguish throughout the drought – exhausted from the workload and upset about the value of their milk.

Kay Tommerup, from Kerry in Queensland, implored supermarkets in September 2018 to introduce a levy.

“There’s no way we can make a go of it with the prices as they are,” she told Yahoo News Australia at the time.

“We make money with our other business and that money has to go into keeping our dairy farm going. We both work about 100 hours a week and work hard.”

A hungry cow eyes up a feed of cotton seed in Coonabarabran, Central Western region of New South Wales, Australia.
Cows eye up feed during the drought in 2018 at a farm in Coonabarabran, NSW. Source: Getty Images

Shane Hickey, from Northern NSW, wrote on Facebook in August 2018 claiming he was earning $2.64 an hour from milking cows.

In 2020, Minister for Agriculture David Littleproud called the levy “a pitiful offering”.

“All they are doing is creating a corporate feel-good fund to promote their own brand,” he said in a statement.

“The supermarkets aren’t listening to me or dairy farmers when we are clearly saying they need to restore the value they stripped from the dairy industry with $1-a-litre milk.

“Ultimately, farmers don’t want charity or to have to rely on grants, they just want milk to be priced at what it’s worth.”

Woolworths milk is now being sold at $1.30 a litre.

Minister for Agriculture David Littleproud is pictured.
Minister for Agriculture David Littleproud has often been critical of the levy. Source: Getty Images

'Nearly killed the industry'

NSW Farmers dairy committee chair Colin Thompson said farmers were disappointed the drought levy was not being rolled into the base price for milk.

"The irrational dollar-a-litre pricing model nearly killed the dairy industry, we cannot let that happen ever again," he said.

"Fair, market-based pricing that recognises the true cost of production is what dairy farmers need for a sustainable future."

Australian Dairy Farmers chief executive David Inall told Farm Online most farmers understood the levy would be dropped as drought conditions eased.

"Appropriately, they've provided five months' notice, which is prudent and appreciated," he told the publication.

Woolworths said it had developed a mechanism to be built into processing contracts to allow the supermarket to provide more timely support for farmers through existing milk purchase arrangements.

In mid-2020 the supermarket said the levy had contributed $50 million to dairy farmers since it was introduced in 2018, with another $30 million to flow over 2021.

It’s hoped the conditions for both Ms Tommerup and Mr Hickey, along with many of Australia’s farmers, have at least improved.

A report from the Bureau of Meteorology in January stated at the end of 2021, and for the first time since 2016, no large parts of Australia were in drought or suffering from a rainfall deficit.

BoM Senior Climatologist Dr Simon Grainger said above average rainfall throughout the year brought “a welcome recharge” to water storages.

Last year was also Australia’s coolest in nearly a decade, according to the bureau.

with AAP

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