In 1992, Australia still had one and two-cent coins in circulation. A stamp was 45 cents, petrol was 62 cents per litre, and milk was $1 per litre.
But according to Coles supermarkets, even though the rest of the country has moved on, the dairy industry needs to go back in time and survive on a 1992 milk price, but with operational costs at 2011 levels. It doesn't add up.
That's the confronting reality for the dairy industry with supermarket-brand milk retailing at $1 per litre, as it has been since Wesfarmers'-owned Coles led the milk price war on Australia Day.
I know that consumers are under cost-of-living pressures, but I also believe that they want a sustainable fresh milk supply chain, so farmers can continue producing fresh milk every day of the year.
The fact is that with milk at $1/litre there is not enough value in the supply chain for farmers, processors and retailers to be sustainable.
In Queensland conditions, it costs about 52 cents per litre to produce one litre of milk, whereas the farmgate price for the year ahead will be about 53 cents/litre, and less in some cases. That's right: some farmers are already making a loss this year.
In Queensland, 95 per cent of all milk produced by Queensland dairy farmers is for the local drinking market, meaning almost all our milk goes straight into cartons for drinking, and there is no processing capacity in the state to shift to export production. So Queensland dairy farmers are totally reliant on the returns from the domestic fresh milk market.
What I receive in my milk cheque each month is directly linked to what is occurring on the shelves in the supermarkets — the proportions of sales of both supermarket-brand milk and processor-owned, proprietary-branded milk.
Coles' actions have snatched volumes of market share from the processor-owned proprietary-branded milk – therefore our payments have already gone down.
The actions of the Coles-led price war are real and they are happening now.
That's right – while Coles is telling consumers and the government that they are not affecting farmers, farmers are being affected right now. Coles is misleading everyone, but at the same asking for consumers to trust them.
In southern Queensland for the month of February, this meant an initial drop in income that equates to about $8000 per year for an average-size farm, producing about 1 million litres per year. This is just the start – we expect the situation to get much worse if these discounts continue.
The reduction of just one cent at the farm gate adds up to a loss of thousands of dollars across the year.
The rise of Coles-brand milks on the shelves and subsequent sales since Australia Day, according to Wesfarmers, has been 15-20 per cent, which has come at the expense of the branded cartons.
Fresh milk is a dietary staple. The average Australian drinks about 102 litres per year, so most families buy it several times a week.
Knowing this, supermarkets are using milk as a marketing agent to lure consumers from their competitors, to entice shoppers to buy more in their shops while they are there and at the same time grow their own supermarket-store branded milk. It's no accident that the milk fridges are at the back of the store so consumers have to walk past other items as well.
They are also acting as a defacto wholesaler as businesses such as coffee shops buy their milk from a Coles store now rather than from their vendor.
This is the very template of supermarket tactics that has been used in the UK (the home ground of the new Coles executive team) to the extent where branded milk is almost impossible to find. Likewise, in parts of Europe, where UHT milk has taken over, you need to send out a search party to find a bottle of fresh milk, let alone branded milk.
If Australia keeps going on the same path, the result will be less choice for the consumer, which could ultimately lead to higher prices once the supermarkets have an absolute choke-hold, as has happened in the UK.
For dairy farmers to do what they do best we need a fair return for a fair days' work. We can't be expected to produce milk at a loss.
The discount price does not reflect the investment and risk being carried by the rest of the fresh milk supply chain. To rub salt in the wound, at a Senate hearing last week Coles continued to deny there was a problem, and continued to proclaim that they are on a crusade for consumers and consumers should ''trust'' them.
What we need now is real action from the Senate inquiry and the federal government and action from the Australian Competition and Consumer Commission. The dairy industry will be presenting a number of recommendations to the Senate inquiry and pursuing action to get this abuse of fresh milk and market power of supermarkets addressed once and for all.
Brian Tessman is a Kingaroy dairy farmer and Queensland Dairyfarmers' Organisation president.
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