Coles in winter milk price talks

Coles is negotiating winter prices with its private milk label contractor Harvey Fresh in what could be good news for WA dairy farmers.

Company corporate affairs general manager Robert Hadler was in WA last week and said Coles was close to finalising mid-year contract negotiations, including prices, with Harvey Fresh for its own label and the processor's branded milk. An announcement was expected to be made this week.

He said Coles understood through these negotiations that there were cost pressures facing WA dairy farmers and cost increases needed to be recognised at the farmgate.

"We are encouraging them (Harvey Fresh) to increase prices to farmers in their pricing rationale," he said.

Harvey Fresh was not commenting on the negotiations earlier this week.

Mr Hadler said at this stage Coles was committed to keeping its retail private label milk prices at $1/litre for consumers.

He indicated this consumer marketing campaign could continue if farmgate prices for milk increased in WA, but may need to be reviewed pending any price rises.

Mr Hadler said since Coles had dropped the price of its private milk label to $1/litre last year, retail milk sales had risen 13 per cent.

"That strategy has created a positive spinoff for dairy producers in higher demand for milk," he said.

Mr Hadler met WAFarmers last week as part of ongoing discussions about the future sustainability of the local dairy sector.

WAFarmers has been pushing for more transparency in contracts and pricing and Coles has agreed to compile a report into pricing through the supply chain. A consultant will be used to prepare the report but there is no time frame for completion.

Mr Hadler claimed Coles did not know the prices farmers received for their milk at the farmgate, as they had confidential agreements with processors, and relied on industry reports with general pricing information.

WAFarmers president Dale Park said it was important for retailers to realise the cost pressures being experienced by dairy producers and he welcomed the supply chain report initiative.

"After long-running discussions, it is apparent Coles is receiving the message and looking for strategies to improve the long term sustainability of the WA dairy and livestock sectors," he said.

"We welcome Coles' commitment that farmgate returns are taken into account in cost price negotiations between Coles and its milk processors in line with rise and fall clauses in supply contracts.

"We also look forward to the details from the Coles and Harvey Fresh negotiations being made public so growers know exactly what is going on."