Milk Wars

Misha Schubert has an excellent piece on the milk price tensions within the Coalition.

Such spillovers give the public a glimpse of the simmering tensions over milk prices within the Coalition, between those by instinct populist and protectionist and others just as devoted to the pursuit of competition and the free market. It’s hardly a new fight, dating back well beyond the modern Coalition. Yet now it’s being waged by a new generation, and those on the protectionist side of the debate appear more emboldened to press their case publicly than in the recent past. The free marketeers would dearly love to respond in kind, but have been ordered by the Opposition Leader’s office not to engage. As one Nationals senator puts it: ”There are a number of Libs shitty as all hell that the Nats get to say what we want, and they can’t.”

The free-marketers include Kelly O’Dwyer and Scott Ryan (from Victoria), Jamie Briggs (from South Australia), and David Bushby (from Tasmania).
(HT: James on Twitter)

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61 Responses to Milk Wars

  1. Another

    Davidson, you broke the link!

  2. Sleetmute

    It would be interesting to hear Sophie Mirabella’s view on this issue – her seat is full of dairy farmers but she has stood for free-market positions on tax and industry policy in the past.

  3. Barry

    I don’t care about the philosophy of milk prices. I just want to know whay I can buy a camembert in western Germany for Euro0.92 (AUD1.15) and it costs me AUD7.00 in Australia. Not as if Germany is a low labour cost country. Tastes the same.

    Monopoly prices exist only as a result of state intervention. What is the cause here?

  4. wreckage

    Barry: could just be the market. Low supply, inflexible demand. Most agricultural markets are very deregulated within Australia. Also possibly of note might be food safety laws.

  5. Sinclair Davidson

    Fixed the link – sorry.

  6. wreckage

    The major shake-up of the dairy farmers has already happened. Any further market intervention relies on Coles/Woollies being all of these:

    a duopoly in grocery sales

    the only buyers of fresh milk

    willing to destroy their suppliers in pursuit of short-term gains

    AND

    able to gain something from underpricing milk.

    Also, it’s never to early to blame the ACCC for totally fucking something up, so let’s just say that there might genuinely be a problem, and it’s probably because of the ACCC. Abolish the damn thing.

  7. a duopoly in grocery sales

    the only buyers of fresh milk

    willing to destroy their suppliers in pursuit of short-term gains

    None of these are even close to being true.

  8. C.L.

    Alan Jones is responsible for popularising and dumbing down the whole meta-topic of food and groceries, markets and protection. He favours protectionism, of course. The duopoly conspiracy – Coles and Woolies scheming evilly to lower prices etc – has been so mainstreamed by Jones that I’m not surprised Liberals have been told to button up. And yet the paradox is an Australian everyman who feels we’d be better off with a large Mum & Dad sector in the food and groceries sector but who prefers Coles and Woolies.

  9. Toxic

    It would be interesting to hear Sophie Mirabella’s view on this issue – her seat is full of dairy farmers but she has stood for free-market positions on tax and industry policy in the past.

    If she came out and said something along those lines, I wouldn’t necessarily expect absolute hostility from her constituents. Unlike those Northern slackers, Victorian dairy producers are efficient enough to withstand selling their product at the market price.

  10. Mother Hubbard's Dog

    If the evil duopoly is intent on lowering prices, why the expensive camembert?

  11. C.L.

    Dog, there are a few Catallaxy cheese tragics who should know the answer. I’m basically a Coon and tomato with salt & pepper on a SAO type of bloke. That’s the extent of my cheese smarts.

  12. Ghost Of Midyear Christmas Past

    Its not really milk anyway. Its industrial sludge, or at best dead milk.

  13. FDB

    “If the evil duopoly is intent on lowering prices, why the expensive camembert?”

    They come for the cheap milk (corner shops have it at almost double the price, in inner Melbourne at least), and leave with the expensive meat, veg and camembert.

    There are two solutions for the consumer:

    1) Put some time into your shopping, and if you live where I do you’ll get cheaper almost-everything if you ONLY go to Coles or Woolies for the cheap milk

    2) shop at Aldi and let God sort it out

  14. Alex Pundit

    Just LNP them and then they’ll shut up.

  15. Alex Pundit

    Did wonders for QLD.

  16. wreckage

    FDB out here in the boondocks, nay far beyond, Coles and Woollies, when you can get to them, have higher quality produce for cheaper.

    I agree that throwing in some international competition would be good. It’d be nice if Coles and Woollies were permitted a merger once international competition became entrenched, but most likely the ACCC will block that and we’ll end up with no Australian owned supermarket chains. Such is the nature of a government enforced free market.

  17. Entropy

    I was in FNQ during the Qld election and had the misfortune to hear Bob ‘effing Katter trying to diistract the chooks hassling him about his anti-poofters ad by claiming all he really wanted do was get an ‘arbitraged price for milk’.

    So what would happen to those 70 odd dairy farmers in his electorate if the government did jack up the farmgate price of milk? The stupid bastard isn’t much of a chess player. If the farmgate price of milk rises, the processor would just close the factory at Malanda. Then the 70 dairy farmers would have no one to sell their milk to.. Of course. BK jnr would then get the government to buy the factory. Then nobody would buy the milk. So then bob would try and stop the supermarkets from buying other peoples’ milk. So when people buy milk from cheaper places he would start trying to force mums to buy from approved sources of milk only. At which point the pitchforks would be driving new arseholes into his sorry behind.

  18. In a free market, it’s OK to not know what will happen if this or that person sells this or that thing for this or that price. It’s OK everyone. It’s OK.

  19. Cory Olsen

    It’s quite disturbing to see how populist protectionism appears to be, especially how much freeing up our market has benefited Australian families.

    I wonder how long it will take before it is argued that food production in Australia; including milk is strategically important; much like the ailing car industry, and requires protection? Restrictions on foreign ownership? Shutting the gate to miners? Restricting land use?

  20. The family owned corner shop near my house sells 2L of Brownes milk for $2.40, and a loaf of bread for $1.50. So it’s hardly just coles and woolies using those products as a loss leader.

  21. Blogstrop

    I’ll go on happily paying $3 or more for milk. It’s hardly a budget destroyer and I prefer it without the melamine. You’d best check the country of origin of biscuits these days too. Food security is not just something to laugh at Barnaby over. But trying to neutralise him is high on the lefty media priority list.
    Why, if we’re down to complaining about the price of camembert, can’t the populace rise up and protest the hideously expensive monopoly that is cable TV, and the new extravagant Godzilla called NBN?

  22. whyisitso

    I’ll go on happily paying $3 or more for milk.

    Typical of the lefty luvvie mentality. “I’m” happy to pay triple the price and so should “you” be.

    Amazing how Coles and Woolies get all the bad publicity about “Home” brand products. Have you ever been to Aldi? The only non-Aldi brand I’ve seen there is Nestles coffee. Nearly all the rest is the Aldi brand, but they have a different “Home” brand for every product.

  23. Cory Olsen

    Of all the corner stores I’ve ever lived near you’d be lucky to pay only $3!

    However having said that, usually you are paying for convenience, ie; my fav corner store is open on pubic holidays and earlier & later on weekends than Coles/Woolies. Same products just more convenient hours and location.

    Mind you I’m sure the luvvies would hate them, they were Chinese (small business – no unions there!) and may have been in regular breach of labour laws and hours of trading…. So much for the free market!

  24. blogstrop

    There’s a first time for everything, and that’s the first time I’ve been called a luvvie. Let’s not forget that this thread was kicked off by observing a Mischa Schubert article that really is just another “don’t worry about my mates in this dysfunctional government, look over there at the Liberals who don’t agree on everything”. This is not news, and I also have trouble with the concept that what Coles and Woolies do has the blessing of free market purity about it.
    Having milked cows and knowing that dairy farmers work pretty hard for their living, it gives me no joy to see our powerful duopoly playing with their market in this way. Farming may be well into the “get big or get out” phase, and likewise the supply of groceries, but our shopping options are being gradually eroded as lines continue to disappear off the shelves. In various ways these mega-supermarket chains raise the standard wherever they go, but in other ways they are channeling things in a manner that spells cheaper overseas sourced everything at some point down the track.
    I hold no brief for Aldi, only went there a couple of times and found it unsatisfactory in many ways.

  25. blogstrop

    Oh, and that was $3 per 2L, the normal unit load these days, you Prof. Julius Sumner-Miller impersonator.

  26. Cory Olsen

    Government regulation will only enshrine the dominance of woolies and coles; I dont feel that regulating their prices will resolve this.

    Better to bring in more competition to shake them up. Aldi for all its faults (I’m not a fan to be honest), is quite popular; and while many of their “brands” are imports most of their agricultural products are locally sourced. IGA is another one (albeit terribly overly priced).

  27. FDB

    “IGA is another one (albeit terribly overly priced).”

    Depends where you are.

    Admittedly I’m in grocery shopping Nirvana – 15 mins by tram to Vic markets, quicker the other way to Sydney Rd’s Italian/Greek/Middle Eastern bargains, Coles, Woolies, Aldi and IGA all duking it out competing for custom with wily nonnas and hipsters alike, who know when to go to none of them. Independent butchers, bakeries and greengrocers can still thrive in this environment.

    So perhaps, for once(!), my insight is limited. It’s a long time since I lived and shopped in Nedlands.

  28. Abu Chowdah

    I take it you’re one of the hipsters, FDB?

  29. FDB

    In my shopping habits, I’m like a cross between a nonna and a hipster.

    My bicycle has way too many gears, and the back of my head way too much hair, for me to be mistaken for a hipster though.

  30. entropy

    I think we also need to very clear about two things when it comes to the price of milk these days:
    Australia produces about twice as much milk as it uses itself. Thus the main driver of milk prices is the export dollar and the exchange rate; and
    Coles and Woolies have not significantly changed the price they pay for milk from the processors. Home brand milk is simply a loss leader for them, to get hubby on the way home from work to walk past the choccies and ice cream, high margin products all, on the way to the back of the shop to pick up some milk.

    The dairy farmer organisations and processors hate this low price campaign for home brand milk though, as it erodes market share of their own brand milks, which generate much higher margins for the processor than bulk Coles or Woolies brand milk. It is possible that these eroded processor margins could eventually filter down to the price that farmers get, within the constraint of world price. And it hasn’t provably happened yet. This farm gate price reduction would not be even though, as Victorian producers have gotten much, much better at producing milk than say, Queensland dairy farmers (and we are not talking a few % points here, either), and are much more export oriented. So BK jnr’s people are potentially vulnerable.

  31. entropy


    I’ll go on happily paying $3 or more for milk. It’s hardly a budget destroyer and I prefer it without the melamine.


    Blogstrop, Melamine only (illegally) appeared in a few chinese food products as a milk substitute scam, in China. It had nothing to do with Australian milk, beyond Australian powdered milk was probably what they were supposed to be using.

    Perhaps you are confusing this incident with the use of Permeat to improve the generally lower quality of home brand milks and make up for lower margins. Permeats are milk solids extracted from fresh milk in the process of making other milk based products. Nothing to worry about. Home brand milk is perfectly fine, with a growing family I go through litres of the stuff every day, but as far as taste goes you get what you pay for. But if you want (and can afford) really good tasting milk you should pay for it by buying processor brand milk.

  32. Infidel Tiger

    The same people who complain about cheap milk, complain about expensive petrol.

  33. Infidel Tiger

    Also, I’ll bet my left nut that breaking the Coles and Woolies duopoly with more competitors will lead to even cheaper milk.

    I can’t believe we live in a country where cheap food and products are bad things.

  34. wreckage

    I can’t believe we live in a country where cheap food and products are bad things.

    I know, right? And Julia’s convinced she can win an election on the back of a conscious attempt to make absolutely everything more expensive.

  35. entropy

    Aw, come on wreckage. We all know the price on cawbin only applies to da big pulluders.

    I wonder what the carbon tax on a three litre bottle of milk produced in Shepparton, processed and bottled in Melbourne and sold in a shop in Alice Springs will be?

  36. blogstrop

    “I can’t believe we live in a country where cheap food and products are bad things.”
    No, it’s not the cheapness that’s the problem, it’s the flow-on effects on where and how products are sourced and brought to market. Cheapness is not a universal force for good.

  37. Toxic

    No, it’s not the cheapness that’s the problem, it’s the flow-on effects on where and how products are sourced and brought to market.

    Why not let the consumer decide?

  38. Infidel Tiger

    Cheapness is not a universal force for good.

    Not in a woman, but cheap food should make your heart sing.

  39. blogstrop

    Toxic, the consumers can and will decide, just like quite a few of them vote Labor or Green. But what do you do when the productive industries have all been offshored – look forward to a poorer version of the Middle-eastern future of no jobs, just social security funded by minerals to live on, and homebrands to buy?
    IT – it may make your heart sing “enough!” Cheap food can be either a bargain or complete rubbish, you know that. The way homebrands and offshoring are going here, we’ll get more rubbish and less bargains.

  40. Infidel Tiger

    What’s wrong with Homebrands?

  41. Toxic

    But what do you do when the productive industries have all been offshored – look forward to a poorer version of the Middle-eastern future of no jobs

    Insulating the inefficient dairy farmers of FNQ from market pressures will hardly stave off their destruction in the long term – especially when farmers inside this country are perfectly capable of producing milk at current farm gate prices and still manage have plenty to spare for export.

    The great big hope to stop industries ‘offshoring’ in the long term is to end government interference in these industries, not double down on it and make consumers poorer.

    And no, we won’t all be drinking imported UHT in 20 years.

  42. blogstrop

    I doubt that whether they pay $1 or $1.50 for a litre of milk is going to make the average consumer noticeably poorer. Certainly not any of the ones on this blog.

  43. Toxic

    If consumers, shops, processors and farmers can’t be trusted to trade at the ‘right’ price for a litre of milk, then precisely how do you determine the right price for a litre of milk?

  44. wreckage

    I doubt that whether they pay $1 or $1.50 for a litre of milk is going to make the average consumer noticeably poorer. Certainly not any of the ones on this blog.

    The point is that plenty of dairy farmers can make a profit at those rates. The industry is undergoing a restructure that started with the end of milk quotas – and most likely would have happened anyway, as it did to the pig industry – and that the supermarkets have zero effect on the trajectory of the dairy industry. Zero.

    I’ve been over the numbers for both the dairy and pig industries in modest detail about 3 years ago. The same is happening in both industries and has been happening since at least the 70′s.

    You can find all this out if you want to, the research takes some time – which I don’t have, so don’t ask – but is not hard. You can get figures from dairy, beef, pig, chicken producer bodies and ABARE that will give you farmer numbers, herd sizes, and price per year back to the sixties, and compare. The same trends hold for all.

  45. Admittedly I’m in grocery shopping Nirvana – 15 mins by tram to Vic markets, quicker the other way to Sydney Rd’s Italian/Greek/Middle Eastern bargains, Coles, Woolies, Aldi and IGA all duking it out competing for custom with wily nonnas and hipsters alike

    Some duopoly!

  46. Blogstrop

    Take note of what Entropy said above about the taste of the cheap milk, and then try a few different breads. I have tasted Jersey milk at the dairy, and I’ve certainly compared different breads at different prices.
    How do you determine the right price for a litre of milk?
    Apparently it’s different for dairy farmers and for economists; the dairy farmer will be told he’s going to get only a subsistence wage, while economists are paid in line with the general market for similar desk-jockeys: not just bed and board.
    Making a profit is ok when you’re being someone’s business adviser, but you actuvely subvert that when you change into the consumer. Then it’s all about you, and your cheapness.

  47. Cory Olsen

    Economists do make provisions for those dairy farmers who are unable to turn a profit in today’s competitive international markets; unemployment benefits and retraining-reeducation.

  48. How do you determine the right price for a litre of milk?

    You don’t. You let the market determine it. Which it has done without outside assistance for over 10,000 years.

  49. wreckage

    Making a profit is ok when you’re being someone’s business adviser, but you actuvely subvert that when you change into the consumer. Then it’s all about you, and your cheapness.

    I sympathise, but why should a small sub-group of dairy farmers control the entire milk market? Give them some assistance to adjust and let it be.

    Meanwhile does anyone know why the people who supply those dairy farmers with chemicals get a 15% tariff protection??

  50. blogstrop

    “You let the market determine it.”
    So predatory pricing and fairly extreme loss-leader behaviour by the big guns is just the good old water-finding-its level-floatie-market self adjusting? I think not.

  51. papachango

    If the evil duopoly is intent on lowering prices, why the expensive camembert?

    As one of the above-mentioned ‘cheese tragics’, I’ll have a go at this. First there is no cheese called ‘Camembert’ made in Australia; like Champagne it must come from a specific region in Normandy – I belive the frogs are pursuing legal action against cheesemakers in other countries who call their products Brie, Camembert etc.

    There is only imitation Camambert made in Australia, and it is vastly inferior to the French stuff, mainly because of laws banning the use of raw milk in its production.

    But I digress. Why is a shitty substitute so expensive here, when in France you can get a whole camembert for less than 1 Euro? It’s not ecomomies of scale or the supply side – In Australia big producers like Lactos, King Island, and even (shudder) Kraft produce industrial-scale quantities of the stuff, whereas in France and Italy the best cheeses are small, locally made and still cheap.

    It’s the demand side, and a bit of market positioning. To the French, camambert is an everyday cheese, and serving it to guests would be an absolute no-no – like an Aussie dinner party’s cheese platter consisting of individually wrapped Kraft singles.

    The Frogs go through lots of the stuff every day and wouldn’t tolerate paying high prices for it. Whereas most Aussies day to day go for Bega tasty on a Sao, and think even the cardboard tasting locally made ‘camembert’ is somehow ‘gourmet’ and worth paying seven bucks for. Savvy cheese marketers have exploited this price point over the years.

  52. wreckage

    So predatory pricing and fairly extreme loss-leader behaviour by the big guns is just the good old water-finding-its level-floatie-market self adjusting?

    AFAIK the market is set by export parity. Every other agricultural producer has to live with that, why not dairy?

  53. wreckage

    Savvy cheese marketers have exploited this price point over the years.

    Also, importation of raw-milk cheese is probably illegal.

  54. Cory Olsen

    According to Dairy Australia 8% of the world’s dairy trade is made up of Australian milk exporters.

    This would seem to indicate coles and woolies arent the only buyers of Australian milk

    http://www.dairyaustralia.com.au/Statistics-and-markets/Farm-facts/Dairy-at-a-glance.aspx

  55. .

    So predatory pricing and fairly extreme loss-leader behaviour by the big guns is just the good old water-finding-its level-floatie-market self adjusting? I think not.

    Yep. Compete or die.

  56. .

    I nearly launched some invective at papa but read his whole post. He is right.

    English speakers are spoilt for choice if they have the disposable income. Most French people eat the same shit day in day out.

    If only foodies knew what clueless twats they were.

  57. sdog

    serving it to guests would be an absolute no-no – like an Aussie dinner party’s cheese platter consisting of individually wrapped Kraft singles.

    But whacking a box of Ritz crackers and an aerosol can of Cheez-Whiz on the coffee table and telling your guests to have at it is all right, yeah?

    Yeah?

    Okay, if it’s not, I don’t want to know you anyway ;)

  58. .

    FDB mentioned Aldi.

    I recommend their fresh meat, milk and plain cheeses.

  59. Toxic

    So predatory competitive pricing and fairly extreme standard Marketing 101 loss-leader behaviour by the big guns price-taking supermarkets is just the good old water-finding-its level-floatie-market self adjusting?

    Pretty much.

  60. Toxic

    English speakers are spoilt for choice if they have the disposable income.

    Perhaps in most cases, but not with food. There are many ways in which France is inferior to the Anglosphere countries, but the availability of cheap, good, filling, healthy, tasty and varied food is certainly not one of them. Though the butter mountains and wine lakes resulting from the stupendously expensive Common Agricultural Policy no doubt has something to do with it.

    Also, don’t forget about the nanny-state bullshit that we have to put with. Are we expected to believe that the French have hard enough stomachs to digest unpasteurised cheese but that we don’t?

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