'Watering down' helps keep milk prices low

Crying over it won't help: Australian-owned dairies are under increasing pressure. Picture: Rob Homer
Crying over it won't help: Australian-owned dairies are under increasing pressure. Picture: Rob Homer

THE supermarket shelves may be groaning under the weight of a variety of different milks, but aside from price, which is best?

It has emerged that about 16 per cent of supermarket milk contains permeate — a green-coloured product left over from cheese making. According to Food Standards Australia New Zealand, milk producers are allowed to adjust components of milk such as permeate to meet consumer demand, and to adjust for seasonal differences affecting levels of fat and protein in milk.

Some producers say it is a way to "water down" the product and reduce costs, after moves by the big two supermarkets last year to cut the cost of a litre of generic milk to $1 put pressure on many dairy farmers.

Peter Skene, chief executive of Aussie Farmers Dairy (the supply company behind Aussie Farmers Direct), a smaller producer, said the company's milk was permeate-free.

It is also Australian-owned, unlike 90 per cent of milk which is sold in Australian supermarkets.

Mr Skene said cheap milk was not sustainable and it was vital that consumers supported Australian-owned dairy farmers.

"I think it is important to keep money in Australia. It provides benefits in terms of innovation, right through to consumers," Mr Skene said. "The globalisation of the food industry is a concern — knowing where food comes from is important, and Australia has some of best produce in world.

"As the world becomes smaller and large supermarkets import more products, we are concerned about the future of the farmers.

"I don't think consumers are aware where milk comes from."


- Riverina Dairy is owned by Fonterra (Australia), a co-operative owned by more than 11,000 New Zealand dairy farmers. It is one of the top six dairy companies in the world by turnover.

- Dairy Farmers Australia is owned by Lion (National Foods Australia), which is owned by Japanese corporation Kirin Holdings Company. Lion produces the generic milk for the two big supermarkets.

- Devondale dairy products are made by the Murray Goulburn Co-Operative Co Ltd which is the largest co-operative dairy company in Australia.


Coles’ and Woolworths’ $1 milk may have been celebrated by customers but dairy insiders say it may undermine future food security.

The Senate inquiry last year into the so-called milk wars noted that benefits gained by consumers had not received enough attention in the debate.

‘‘In general, price discounting is likely to be pro-competitive and of benefit to consumers. Provided it does not constitute predatory pricing, a retail price cut should not be discouraged,’’ the authors wrote.

The inquiry also noted the decrease in Australian production of milk from 11 billion litres in 2004 to 9 billion litres in 2011.