Why Woolies and Aldi milk prices have gone up
MILK prices are on the rise at Woolworths and Aldi, but the supermarkets have stressed they aren't pocketing extra profits.
News surfaced this morning that the two competitors would increase the price of their homebrand milk labels by almost 10 cents, begging the question if profits would be passed on to struggling dairy farmers.
Both supermarkets have explained the nationwide price hike - which brings a one-litre bottle of milk to $1.29 - hasn't been driven by them, and have pointed to market pressures.
Coles is now being pressured to follow suit.
Price warfare originally saw the retail giants drop the price of their private label milk to just $1 a litre. Woolworths then lead the charge in February when it added a 10 cent levy to its own two and three-litre milk varieties. This was designed to provide relief to farmers amid stagnant farmgate prices - the money farmers receive from processors for the milk they produce.
Woolworths told News Corp Australia today the 10 cent levy continues to flow through to more than 450 dairy farmers, and explained the most recent price increase was due to steep rise in farmgate prices across the past several months.
"Since February we have seen farmgate prices increase significantly and they're forecast to continue rising throughout the year," a Woolworths spokesperson said.
"As a result of these farmgate price movements, we have been paying our suppliers even more for milk and other dairy products across the category over recent months.
"Due to these ongoing whole-of-market cost pressures, we have reviewed and adjusted the price of Woolworths Milk."
An Aldi spokesperson echoed the comments from Woolworths, telling News Corp the price increase was necessary to help build a sustainable Australian dairy industry.
"We have recently increased the retail price of our entire fresh milk range. These price rises are the direct result of the recent increase in the farm gate milk prices agreed between our milk suppliers and the dairy farmers," an Aldi spokesperson said.
"We will continue to maintain the collection and distribution of 10 cents per litre implemented earlier this year and ensure that the proceeds are passed onto dairy farmers in full."
NSW Minister for Agriculture Adam Marshall welcomed the move and called on Coles to follow the same price increase, and pass the proceeds onto farmers.
"The ball is now squarely in Coles' court. It's time for them to step up and deliver a 10-cent per-litre pay boost to our dairy farmers," Mr Marshall said.
"Our hard-working dairy farmers in NSW deserve a better deal and that's why I've welcomed the recent announcement by Aldi and Woolworths to increase the price of milk.
"Coles has a real opportunity here to play ball and deliver our dairy farmers a fairer price.
CEO of advocacy group Australian Dairy Farmers, David Inall told News Corp: "These price rises from Woolworths and ALDI show that after eight long years, the major retailers are recognizing that dairy has a value. It means they are recognising the price of milk can rise just like it does with meat, vegetables, or any other commodity.
"We would of course like Coles to follow suit, but in the meantime we are relieved that all three retailers have locked in their commitment to continue passing 10c/L back to farmers.
"We understand the intent of the Woolworths and ALDI price rises is to ensure that payment to farmers is sustainable, which is why it makes sense for Coles to do the same."
In Rabobank's latest Global Dairy Quarterly report, senior dairy analyst Michael Harvey said competition for milk among dairy companies was driving "record-high opening and forecast closing milk prices in 2019/20".
However, he said there would be challenges in rebuilding the milk supply.
"Autumn was dry for many dairying regions, leading to ongoing feed shortages. Also, many dairy farm operators will need time to rebuild herds. With a return to profitability as milk prices improve, an immediate focus will be on repairs and maintenance ahead of major expansion projects," Mr Harvey said.
News Corp has contacted Coles for comment
NEW MILK PRICES
- One-litre Woolworths branded fresh milk - WAS: $1.20 NOW: $1.29
- Two-litre Woolworths branded fresh milk - WAS: $2.30 NOW: $2.39
- Three-litre Woolworths branded fresh milk - WAS: $3.50 NOW: $3.59
- One-litre Aldi branded full cream milk - WAS: $1.20 NOW: $1.29
- Two-litre Aldi branded full cream milk - WAS: $2.30 NOW: $2.39
- Three-litre Aldi branded full cream milk - WAS: $3.50 NOW: $3.59