Coles to buy milk directly from farmers

Coles has announced it will bypass milk processors and begin sourcing milk directly from farmers in Victoria and southern and central New South Wales for Coles Brand fresh white milk, starting next month.

The company has previously relied on dairy processors to purchase milk from farmers for its homebrand products, under contracts that allow the processor rather than the supermarket to set the farm gate price. Under the new sourcing model, Coles will offer the competitive farm gate price directly to farmers, and pay dairy processor Saputo to process and bottle under a toll processing agreement.

It will also offer farmers longer-term contracts of one, two or three years, as well as guaranteed prices for two years and a floor price in the third year.

“In addition to offering a fair and competitive price, dairy farmers will have more choice regarding the length of contract and more certainty around income,” Coles Chief Operating Officer Greg Davis said. “If the model works as we hope it will, we will look for opportunities to expand the footprint to other milk-producing regions and potentially other products in the dairy case.”

Australian Dairy Farmers (ADF) Chief Executive Officer David Inall supports the increased competition, but said Coles must ensure that $1-a-litre milk never returns to its shelves after the price was raised to $1.10 per litre in March.

According to Coles, the price of homebrand two- and three-litre milk will remain the same, and it will continue to pass on the benefit of the price increase to processors in other regions for distribution to their farmers supplying milk.

National Farmers’ Federation (NFF) CEO Tony Mahar welcomed the announcement, stating it is a step in the right direction. However, he said: “There is certainly no silver bullet to the challenges confronting our dairy sector. The NFF and Australian Dairy Farmers look forward to learning the finer details of how the new sourcing arrangements will work and how they will serve to advance the interests of our dairy sector.”

Coles will also invest an additional $1.9 million into improving the sustainability of Australia’s dairy industry through the Coles Sustainable Dairy Development Group. This will fund research into more sustainable farming practices, adoption of new technology, more efficient use of pasture, feed and water, and support for business development and talent retention, and farmers will have a direct voice in how funds are deployed.

Image credit: ©stock.adobe.com/au/davizro photography