MAJOR Queensland milk processor Lactalis has been accused of ripping off farmers, including the additional 10c/litre drought levy as part of its minimum price paid to Queensland dairy farmers, rather than adding it on.
Queensland Senator Susan McDonald said to make matters worse, Lactalis was offering farmers less than the full costs of production and paying at least 6c/litre less than the Queensland Dairy Accounting Scheme's calculated costs.
Senator McDonald said the issue would be referred to the Australian Competition and Consumer Commission.
"What's worse is that it appears Lactalis is not only paying less than the cost of production, but are including the additional drought levy as part of that minimum price they're offering farmers," Senator McDonald said.
"This blatantly disregards the purpose of the payment as an extra levy given exorbitantly high production prices during drought."
Senator McDonald said Lactalis had also unreasonably pressured farmers into accepting the lowball offer before January 1, which is when the Mandatory Dairy Code of Conduct will come into effect.
"These producers have deliberately been deprived of the new protections offered by the Coalition government's new dairy code, and it's shameful," she said.
However, Lactalis issued a media statement on Monday afternoon`saying it was paying farmers a price that was in line with industry benchmarks, and fully recognised farm conditions and the need for a sustainable industry.
"Lactalis prices in Queensland are negotiated with an ACCC approved bargaining group, Premium Milk, who represent farmers interests, and negotiate prices with full knowledge of other prices in the market and the operating costs of farms," the statement reads.
"Premium Milk and Lactalis have agreed on pricing, and from January 2020, Lactalis will significantly increase prices paid to farmers, which delivers farm incomes higher than the latest QDAS data of operating costs for a series of average farms."
The statement also says Lactalis is passing on the supermarket drought support payments to farmers in full, in a "very transparent manner" that was recently reviewed by the ACCC.
"There are processes in place, agreed with retailers and farmers, to ensure the proceeds are passed on in full, and Lactalis works with an independent external auditor to report on compliance each month."
Lactalis also denied it had put pressure on farmers to sign a new contract before the mandatory dairy code of conduct came into place.
"Lactalis continues to negotiate with Premium Milk, who represent our Queensland farmer base, in good faith on the milk price for the 2020 year in line with the existing Lactalis/Premium agreement," the statement reads.
"The contracts Lactalis has with dairy farmers expire at the end of December 2019, and in order to continue purchasing milk from dairy farmers, Lactalis proposed a one year contract for 2020.
"This ensures our farmers have some certainty and are not out of contract while waiting for Dairy Code of Conduct contracts which are prescribed to run from July to June."
The statement says the information obtained by Senator Susan McDonald was not an accurate representation of the negotiations and proposed milk price between Lactalis and Premium Milk.
"Lactalis has had several conversations with Senator Susan McDonald and provided extensive documentation in attempts to provide more accurate information and answer any questions that the senator had," the statement reads.
"Lactalis will fully cooperate should the ACCC pursue an enquiry, as it has with several ACCC inquiries in recent years."
Senator McDonald also took aim at supermarket giants Coles, Woolworths and Aldi for turning a blind eye to the conduct of their milk suppliers.
"Supermarket executives told me in a Senate hearing this month they had received assurances from processors that prices offered to Queensland farmers were above the costs of production," she said.
"But after examining the situation, I believe the supermarkets are not exercising due diligence in ensuring the ethical sourcing of their milk."
Senator McDonald said it had been tough for eight years since the supermarket milk price wars started, but drought had added to the pain, forcing Queensland dairy farmers to buy feed which has dramatically increased their costs, as well as going into debt.
"I can't begin to explain the anger I have felt as I speak to dairy farmers in tears at the prospect of losing the only life they've ever known," she said.
"This is not just about price, it is about ensuring the survival of a part of the agricultural industry that Australians value and want to continue."