Dairy Farmers are worried changes in Woolworths’ milk supply arrangements will negatively affect farmgate prices. Parmalat recently won the contract to supply Woolworths’ house brand milk products in NSW. This contract was previously held by Lion (formerly National Foods), which sourced around 100 million litres of milk from Dairy Farmers Milk Co-operative (DFMC) members in NSW to supply Woolworths.

DFMC today wrote to its 320 farmer members in New SouthWales (NSW) advising them to be careful in assessing any new contract offers to supply Parmalat with milk in order to fill the Woolworths private label contract.

DFMC Chairman, Mr Ian Zandstra, said the Co-operative had been hopeful Parmalat would come to an agreement with Lion to continue to source milk through DFMC, but the negotiations between Lion and Parmalat had ended in a stalemate.

“We understand Paramalat will now be out in the market trying to convince NSW dairy farmers to supply them directly without the support and assurance of working through a Co-operative,” said Mr Zandstra.

“Parmalat’s move creates uncertainty in the NSW dairy industry around the right contract terms and price for milk supplied to the local consumer market.

“DFMC’s has serious concerns that Parmalat’s decision to abandon the Co-operative based supply and pricing arrangements will result in a reduction in farmer revenue in NSW. This risk is heightened by the continuation of the $1 per litre retail price point that is being maintained by the major supermarkets, which is putting downward pressure on processor and farmer returns.

“NSW farmers must realise what the market value is for their high quality milk is in NSW. The current DFMC Tier 1 price is $6.65 per kilogram of milk solids, or 47 cents per litre, with additional incentives worth on average 4 cents per litre. This should be the minimum a NSW farmer should receive from Parmalat.

DFMC represents 320 dairy farmers in NSW who produce over 360 million litres of milk annually. Nationally, DFMC represents 780 dairy farms producing one billion litres of milk per annum. Through its relationship with Lion, DFMC is the largest single supplier to the Australian consumer dairy market.