The latest figures from Dairy Australia show that when Australia’s two largest processors, Murray Goulburn and Fonterra, in late April slashed the milk price paid to their farmer-suppliers by 15 per cent and tried to claw back milk cheques already paid out for the previous 10 months, cheap $1 a litre supermarket label home-brand milk commanded 66 per cent of the local fresh milk market.
But as the public realised the damage done to farmers by the downward price pressure of Coles and Woolworth’s own-label cheap milk — with as many as 1000 dairy farmers in Victoria and Tasmania having quit the industry in recent years — consumers have rapidly switched to buying more expansive branded milk that returns a greater share of profits to farmers.
Dairy Australia economist John Droppert said that sales of branded white milk such as Pauls Farmhouse Gold or farmer-owned co-operative milk such as Green Pastures and Maleny Milk had jumped 7 per cent since April, now holding steady at a 45 per cent share of all white milk sold in grocery stores.
In April, branded milk had just 34 per cent of sales compared to the 66 per cent of discount private label milk.
“Private label ($1-a-litre supermarket) milk still has the higher market share but we have seen a dramatic shift in consumer buying patterns following the April price step-down,” Mr Droppert said.
“We know there is a huge groundswell of support amongst consumers for dairy farmers because they realised, because of all the publicity, the damage that was being done to farming families by low milk prices. They are now buying their milk differently as a result, even if it costs them a bit more.”
Mr Droppert said the April price crash followed by even lower farm milk prices from all major processors since July had seen many Australian dairy farmers retire, quit the industry in despair, or kill cows as they struggled to break even.
Other farmers have shrunk milking herd numbers or pruned cow feed, fertiliser and irrigation costs, which Dairy Australia predicts will further reduce milk production in Australia by another 5 per cent.
It forecasts national milk production at just 9.06 billion litres for 2016-17, well down from the 9.7 billion litres bought from dairy farmers two years previously.
On the brighter side of the ledger, Mr Droppert said with milk production in Australia, New Zealand and Europe falling quickly — and China starting to increase its dairy orders — it appeared the worst of record low global dairy price shock was over.
In the past three months, global prices for bulk dairy commodities such as Skim Milk Powder, whole milk powder and cheese have risen 20 per cent, encouraging big processors such as Fonterra, Warrnambool Cheese and Murray Goulburn to give their farmers hope of farmgate price “step-ups” soon.
Another trend highlighted by Dairy Australia was the consumer shift away from low-fat or skimmed milks to full cream fresh milk, and from sweet yoghurts to natural unsweetened products, as the search for healthy foods that are as natural and unmodified as possible continues unabated.