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FANTASY LAND: Milk costs less than water
ALEX SINNOTT
19 Feb, 2011 04:00 AM

ONE of the south-west?s largest dairy processors has broken its silence on the supermarket milk price war, with its chairman describing the retail wrangling as damaging to the industry.


Warrnambool Cheese and Butter (WCB) chairman Frank Davis has made the processor?s view known on the milk price war in a speech at Sungold Field Days, lambasting supermarkets for having a ?fairytale? attitude to pricing.


The speech is the first time one of the big three south-west dairy processors has made a public statement on the discount milk war since Coles supermarkets flagged its intention to lower the cost of its generic brand in late January.


He told The Standard that milk processors needed to make their views clear on the effect bargain-basement pricing had on dairy industry confidence.


?There?s something wrong somewhere when milk prices are below the cost of bottled water,? Mr Davis told the audience.


?(The retail war) is like something written by (fairytale writer) Lewis Carroll, it is Alice in Wonderland type stuff.


?The retail price of milk has remained largely unchanged in the decade since deregulation (of retail milk prices). We are still paying the same amount for two litres of milk as we were in 2001.?


Mr Davis told the field days luncheon audience about the effort put into milk production compared to producing bottled water for retail sale.


?I?d like to talk about the Coles initiative and in doing so reflect on the delivery of a litre of milk.

The farmer has to develop the herd, work on the pasture, buy fertiliser, buy fodder then there is the labour involved in milking cows.


?After that, the milk is delivered by refrigerated transport were it is pasteurised and homogenised then packaged.


?On the other hand, producing bottled water is as easy as turning on a tap.?


Murray Goulburn chairman Grant Davies was contacted by The Standard yesterday but did not reply. The final processor of the south-west?s big three supply companies, Fonterra, has also made no official comment on the issue.


A spokeswoman for Fonterra told Fairfax newspapers this week that the company had no official response to make.


Mr Davis said it was up to Murray Goulburn and Fonterra to make respective statements on how the supermarket price war would affect their operations and farm gate prices paid to farmers.


He said his speech was well-recieved by farmers who were keen for WCB to make a stand on the issue.


?I don?t know why they haven?t made statements themselves but we?re keen to address an issue which is of huge concern to our suppliers,? Mr Davis told The Standard last night.


Coles and Woolworths have repeatedly assured the dairy industry that farm gate prices would not be affected by the loss-leader arrangement.