Australia's dairy industry is characterised by big power imbalances, with supermarket retailers at the top and farmers at the bottom, disadvantaged by weak negotiating positions and high exposure to risk, the ACCC says.
The competition watchdog has called for a new mandatory code of conduct for the industry, while its 18-month investigation has made a number of surprising findings.
* ON SUPERMARKETS: "Supermarkets use their strong bargaining position to negotiate low wholesale prices and reduce the profit margins of processors.
* ON $1 MILK: "Many farmers believe that the major supermarkets pricing their milk at $1 per litre devalues the work they, their families and staff do to consistently produce high quality milk."
"The ACCC did not obtain any evidence that supermarket pricing, including $1 per litre milk, has a direct impact on farmgate prices."
* ON PROCESSORS: "Processors that are able to supply both export and domestic markets can mitigate their exposure to supermarkets' bargaining power to some extent by adjusting the focus of their businesses on different markets as needed."
* ON FARMERS: "Most dairy farmers have little bargaining power and limited scope to reposition their businesses."
* ON NEGOTIATING: "The generic and perishable nature of raw milk, and large number of farmers relative to processors, means that effective contract negotiations between most individual farmers and processors are unlikely to occur."
* ON CONSUMERS: Retail milk prices have fallen since dairy industry deregulation in 2000, and private label milk prices have dropped another 12 per cent since 2011.
"Consumers have benefitted from the lower real retail prices of a range of other dairy products including cream, UHT milk and a number of cheese products over the past eight years," the ACCC says.
