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Recommendations

Simona

  • Three main recommendations to our stakeholder

  • Aims to structure commodity chain in the interests and welfare of everyone involved

'Milk Price Wars'

Sophie

  • What is it?
  • Coles v. Woolworths
  • Senate inquiry

Deregulation

Maddy

  • What have been the principal impacts of deregulation on the Australian Dairy Industry?
  • Overview of history and impact of deregulation policy on Milk

What were the impact on dairy farmers?

The Commodity Chain

Chloe

  • Key industry bodies said the discounting was having a trickle down effect on the value chain as it was forcing suppliers and processors to reduce prices paid to dairy farmers.
  • Australian Dairy Farmers (ADF) President said there would be a loss of $44 million from the value chain.
  • Cut throat discounting was pushing many farmers out of business.

Consumer desire for $1 'homebrand' milk

Coles in 2011, as part of it's 'down down' promotion, began to sell it's own home brand milk at $1 per litre.

Woolworths quickly followed suit.

Popularity grew tremendously, accounting for 50% of total retail milk sales in 2011 and up to 71% in fresh regular white milk.

Recommendations

1. ADF to adopt a stringent approach in lobbying the Australian Government to strengthen collective bargaining legislation.

2. ADF to welcome a comprehensive multinational agreement to remove trade barriers, providing measures exist to protect the welfare of Australian dairy farmers involved in international contracts.

3. ADF to lobby the Australian government to implement tighter supermarket accountability measures and recommend dairy farmers enter into long term contracts with leading supermarkets and suppliers to ensure equitable return on their product.

4. Australian Dairy Farmers to emphasis the importance of the small innovative farms in order to keep the industry available to small and regional places.

Impact

  • Dairy farms fell by 70% in previous 30 years
  • Number of dairy cows fell by 40%
  • Increased in 1990s
  • Deregulation favours "competitive business"
  • Australia wide decline in support for agriculture development
  • Responsibility on role of industry

Two Research Questions

Deregulation

History

1. Division of labour in factories

2. Milk production and contribution to the GDP

3. Major stakeholders and market share

4. Commodity Chain

  • 1 July 2000 'Deregulation Day'
  • Dairy Structural Adjustment Program (good or bad?)

1. What have been the principal impacts of deregulation on the Australian Dairy Industry?

2. Has competition between Coles and Woolworths, as witnessed in the ‘milk price wars’ adversely affected Australian dairy farmers?

'Milk Price Wars'

We all drink it, we all love it but are the farmers losing out?

Sophie

The Australian Dairy Industry

2011 Senate Inquiry

into milk price discounting

  • Despite having sympathy towards dairy farmers the Senate held price discounting was largely to be pro competitive and it wasn't a matter of for public policy to protect brands consumers no longer want.
  • Responsibility was pushed onto the processors and Coles suggested they improve efficiency to protect profit margin rather than squeezing the dairy farmers.
  • The Senate agreed with Coles and held that competition law is not intended to protect competitors but to promote the competitive process and any regulation could result in 'unintended consequences'.
  • What economic theory does this remind you of?

But is there a shift?

  • There has been an increasing consumer demand for locally sourced sustainable milk.
  • Perhaps the 'milk price wars' had the unexpected effect of focusing public attention on differentiating brands.
  • As a result, Coles and Woolworths have started sourcing their milk directly from the farm gate with the aim of giving farmers 'what they deserve'.
  • Do you think this is just a marketing ploy?
  • This move does show us that consumer desire clearly impacts on Coles and Woolworths decisions.
  • What economic theory does this remind you of?

Commodity Chain

  • Life span
  • 3 stages
  • Farm
  • Processor
  • Grocery store, non-grocer store, exports
  • Australia's milk production in comparison to the world
  • Exports

Market Share

Commodity Chain

- Division of Labour

  • Growing crops to feed the cattle
  • The cattle
  • Need for skilled workers
  • Lack of incentives

Contribution to GDP

Commodity Chain of Milk

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