Woolsworth Scraps its Milk Drought Levy

Article by: Hari Yellina (Orchard Tech)

Due to easing drought conditions and rising milk prices, Woolworths will phase out its 10-cent dairy fee for milk farmers by the middle of the year. Farmers were notified on Friday by the supermarket through milk processors Fonterra, Lactalis, and Bega that the duty on its own-brand two and three litre fresh milk would be eliminated by the end of June. Woolworths will quit paying the 10-cent per litre fee to farmers via milk processors in July as a result of the shift. Until the agreement expires, farmers will continue to receive the 10-cent per litre charge through milk processors.

“As drought conditions have improved and farmgate milk prices have risen by about 15% since 2018, we will be phasing out the special drought tax ahead of the new milk year in July,” Woolworths dairy director Jason McQuaid wrote in the letter. “From the start of the new milk year in July 2022, processors will continue to examine the farmgate price in accordance with their customary methods.” Farmers were upset that the drought levy was not rolled into the standard price for milk, according to NSW Farmers dairy committee head Colin Thompson. “We cannot repeat the foolish dollar-a-litre pricing paradigm that nearly decimated the dairy industry,” he warned.

“What dairy producers need for a sustainable future is fair, market-based pricing that recognises the full cost of production.” Woolworths said it had designed a method that would be included into processing contracts, allowing the retailer to provide farmers with more timely support through current milk procurement agreements. Since its inception in 2018, the levy has delivered $50 million to dairy producers, with another $30 million set to flow in 2021, according to the supermarket in mid-2020.

It is starting to look like the big supermarkets and their customers understand the value of supporting the local dairy industry, but there is a degree of disappointment among dairy farmers that the drought levy was not rolled into the base price. Fair, market-based pricing that recognises the true cost of production is what dairy farmers need for a sustainable future.