Woolworths and $1 milk

Originally posted by nutcracker ↑

Originally posted by Pioupiou
I do not know what dairy farmers get for milk, but I presume for starters that it is less than $1 and more than 50c a litre. My instinctive tendency is to pick the mid-point of a range of numbers that spring to mind – that is, 75c a litre in this case. Whatever the farm-gate price is for a dairy farmer, it must suffice to induce most of them to produce milk, because there is no noticeable shortage on shop shelves, and I am fairly sure the litres retailed have not declined in recent years for the want of supply.

I would not normally care if Woolworts increased the price of milk to $1.10 per litre, but the political way they have gone about it gets up my nose. Instead of simply paying their suppliers more, and adjusting their prices to whatever they fancied, they have invented a pathetic story that the extra 10c is going to the farmers, as though this should warm the cockles of my heart. Is Woolworths now going to increase the price of sugar, wheat and wine to raise money for cane farmers, wheat farmers, grape growers, and so on? As there is nothing unique about farmers, what about helping bakers, butchers, fishers, and others?

I'll now not think of Woolworths as the default retailer I call into when I need milk, and then often buy a few other items on impulse.
According to the system typical farm gate price range between $0.46c/litre - $0.49c/litre, however [I am unable to find the newspaper] last week a farmer was interviewed indicating he was averaging only $0.20c/litre.

I have also had years on the land and sold produce via markets to the large & smaller supermarkets and where the product was retailing at anything from $2.50-$5.50kg, as a grower I would have been lucky to receive anything between $0.20-$0.50c and then sometimes zilch.
At rare occasions I would get $1.00, it was almost like winning the jackpot, regulatory bodies at the time we complained were toothless tigers, lawyers would want $20k up-front-with low returns taking legal action was out of the question and the chance of winning was virtually zero against the big boys it was just throwing good money after bad.
Very tough game if you are on the land, you are subject to the elements of nature, if it is a tree fruit 5 years before production and by the time it produces the market leaders decide they want something else.
Although it places little money if any in the hip pocket, the lifestyle is great and far better than city jungles.

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By my nature, I am inclined to paddle my own canoe, and let others paddle theirs, and hence I prefer regulatory authorities to keep out of our lives. However, I realise that Australians on the whole like regulation, particularly as a means to curtail people other than themselves. One rarely wins a debate of this nature, because people stick to their beliefs. Writing this post was to entertain myself, not to shift opinion. Maybe I will post on my distaste for corporate charity the next time I am overwhelmed by an urge to write (a furor scribendi in wanky circles) and vent my spleen on a topic that would attract vitriolic responses.

When farmers are interviewed one would not expect them to say, “All is dandy, and I do not want more money, thank you.” If one of them said he gets 20c a litre, he may mean that is his profit, not his revenue (see postscript for more on farmgate milk prices). Remember too, Woolworths purchases milk and other dairy products from the large milk processors, mostly foreign owned, not from individual farmers. It is for farmers to negotiate with the processors, and the processors to negotiate with Woolworths.

If dairy farmers leave the sector in sufficient numbers to effect a lower milk supply, the price will increase. Introducing systems other than the natural balance of demand and supply to keep dairy farmers, rappers, opera singers, tattooists, cherry farmers, brick makers and piemen in their respective activities is a dysfunctional way to run a society, and pathway that has a history of failure.

I have no problem with Woolworths buying milk at whatever price it elects to pay. If the purchase price is lower in Victoria, and milk can be trucked interstate, then that price plus the trucking cost should influence what Woolworths pays for local milk. Also, I have no problem on the retail price that Woolworths chooses in any region, and what smoothing of purchase and retail prices that it decides to implement for pricing-stability reasons. Being a liberal-minded person in the true meaning of the much-debased word “liberal”, which is derived from the Latin word for a free man, I am happy for Woolworths to use milk as a loss-leader, and subsidise it over the full spectrum of dairy products it sources from the milk processor with whom it negotiates contracts, or not.

My gripe is the corny populist method that Woolworths adopted to set the retail price of milk at $1.10 a litre, and as pintohoo wrote, the Pandora's-box effect on other items. The next thing Woolworths will increase the price of meat pies, and gift the uplift to the National Obesity Campaign. It reminds me of the populist things that NAB likes to do to set itself apart from its competitors, and while its management is thus focused, NAB stumbles from one disastrous performance to the next. Look at https://news.nab.com.au/news_room_p...nment-funding-for-good-shepherd-microfinance/ to read the populist crap that occupies the mind of NAB's management, and consider the immorality of being charitable with money that belongs to shareholders.

Postscript – Farm-gate Milk Prices

Because most milk is processed in the sense that the water is extracted, the price quoted in Australian milk-related statistics is usually dollars per kilogram milk solids ($/kgMS). http://www.agriculture.gov.au/milkpriceindex/Documents/dairy-bulletin-january-2019.pdf provides the following pricing information:

Rabobank 2018-19 annual average southern Australia farmgate price $5.65/kgMS. This represents a downward revision from their September forecast of $5.90/kgMS.

2018-19 season prices – Fonterra $5.98-$6.10/kgMS, Saputo $5.95/kgMS, Bega Cheese $5.85/kgMS, ADFC $5.60-$6.00/kgMS, Burra Foods $5.60-$5.90/kgMS, Lion $5.82, ACM $6.00/kgMS, Parmalat $6.10/kgMS, Bulla Dairy Foods $5.80-$6.20/kgMS.

In crude terms, using milk solids as 7% for typical fresh milk, a farm-gate price of $5.50/kgMS works out at $5.5/.07 = 78.6c per kilogram, or using a specific gravity of 1.03, ($5.5/.07)/1.03 = 76.28c per litre. Whatever the price is, it suffice to keep up supply, so there is no need to be pedantic about what it is, and how it varies.