Supermarkets increase milk prices
The AFR reported that Woolworths and Coles have bowed to pressure to help drought-stricken dairy farmers, raising the price of a litre of house brand milk from $3 to $3.30. Several processors have also taken action, announcing a temporary 10c-a-litre increase in October to their wholesale price. The situation raises a number of questions - what went wrong with the normal market mechanism, forcing such invasive price changes? How was it possible for Coles and Woolworths to force their milk supply chain to operate under continuing duress, making the industry non viable? In our assessment, the recent drought only exposed deeper, systemic issues and we suspect that the milk category is not the only one being pushed towards extinction.