Supermarkets are not milking dairy farmers dry: the myth that obscures the real problem


Gary Mortimer, Queensland University of Technology

Australia’s federal agriculture minister, David Littleproud, has called for a boycott of supermarket-branded milk. He is angry about lack of support for a “milk levy” of 10 cents a litre wanted by the dairy industry to support drought-stricken farmers.

Fellow National Party colleagues have called for nothing less than a royal commission into the supermarkets’ support for farmers. Nationals leader, and deputy prime minister, Michael McCormack, has said he is open to the idea.

Amid intense price competition across many supermarket categories, the price of milk stirs passions like nothing else.

But calls to boycott supermarket-branded milk are misguided; and a royal commission would not be money well-spent.

The widely held belief that supermarkets are hurting dairy farmers by driving down the price of milk is incorrect.

It overlooks basic supply chain dynamics and the findings of the 18-month-long inquiry by the Australian Competition and Consumer Commission, which was ordered by then federal treasurer Scott Morrison to investigate the low milk prices paid to dairy farmers.




Read more:
Helping farmers in distress doesn’t help them be the best: the drought relief dilemma


Indirect relations

Looking at the supply chain for fresh milk helps show why the retail price of supermarket-branded milk does not determine the price paid to farmers as some claim.

There are many players within a food supply chain: producers, processors, wholesalers, retailers and consumers.


Fresh dairy supply chain volume map:
Department of Agriculture, Fisheries and Forestry

Dairy farmers typically sell their milk to processors, who then sell to supermarkets. There is a relationship between the supermarket and processor, not supermarket and farmer. Whether the supermarket sells a litre of milk at $2, $3 or $4 has no direct relationship on the price the processor pays to the farmer.

In the words of the final report of the competition watchdog’s Dairy Inquiry, “the farm-gate price paid to farmers for milk used to fulfil private label milk contracts is not directly correlated with private-label milk retail prices”.

Blame dairy processors

The ACCC’s report does identify a range of market failures due to bargaining power imbalances and information asymmetry, but these are crucially between dairy farmers and processors.




Read more:
Murray Goulburn and Fonterra are playing chicken with dairy farmers


Dairy farmers’ weak bargaining power means any higher price paid by supermarkets to processors would not necessarily result in higher farm-gate prices. The ACCC report notes that farmers get no more money for the milk that is sold at higher retail prices (such as branded milk).

Processors, not supermarkets, set farm-gate prices in response to market conditions (global and domestic demand), at the minimum level required to secure necessary volumes. Farmers are not paid according to the type or value of the end product their milk is used in. They are paid the same price for their raw milk regardless of what brand goes on the container.


Distribution of revenue from sale of private label vs branded fresh drinking milk:
ACCC Dairy Inquiry

Also blame consumers

Supermarkets are under pressure to keep food prices low, particularly on staples such as bread, milk and eggs. This is evident from the fact that campaigns to get shoppers to exercise their power as ethical consumers quickly run out of steam.




Read more:
We are what we eat: the demise of the ethical grocery shopper


In April 2016, for example, national attention on the plight of dairy farmers led to a campaign encouraging shoppers to leave “supermarket branded milk” on the shelves. In a single month the supermarket brands’ share of milk sales dropped from 66% to 51%. Then it began to rise again. Within a year it was back to nearly 60%.


https://datawrapper.dwcdn.net/NyTIZ/1/


Adding to confusion

While a milk levy to directly help farmers during the drought has many supporters, the disconnect within the supply chain means it is near impossible for retailers to pass the money directly to the intended beneficiaries. That, again, depends on those who buys the milk from the farmers – the processors.

Despite this, and because the ACCC inquiry’s findings have so far done little to dispel myths about the price of milk, retailers such as Woolworths have seen it as prudent to embrace the levy idea and publicly demonstrate support for dairy farmers.




Read more:
Time to get regulation back into Australian dairy?


All the additional proceeds from its “Drought Relief” milk go back to processor Parmalat, who is responsible for distributing the money to suppliers in drought-affected areas. Coles, meanwhile, has slapped a 30 cent levy on its three-litre milk containers, with the funds going to the Coles Drought Relief Fund.

These measures arguably add to continuing confusion about how the milk market works and the relationship between farm-gate and retail prices.

In the court of public opinion the supermarkets probably had no option but to go along with the charade.

A minister for agriculture, however, should know better.The Conversation

Gary Mortimer, Associate Professor in Marketing and International Business, Queensland University of Technology

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Advertisements

ISRAEL: MESSIANIC JEW WINS SUPREME COURT BATTLE


Bakery owner had lost her Jewish dietary law certificate because of her faith.

JERUSALEM , July 15 (Compass Direct News) – For three long years a Jewish believer in Christ struggled to keep her bakery business alive after the Chief Rabbinate of Israel, the country’s highest religious governing body, annulled her kashrut (Jewish dietary law) certificate because of her faith.

Pnina Conforti, 51, finally gave a sigh of relief when the Israeli Supreme Court on June 29 ruled that her belief in Jesus Christ was unrelated to her eligibility for a kashrut certificate. While bakeries and restaurants in Israel are not required to obtain such a permit, the loss of one often slows the flow of customers who observe Jewish dietary laws and eventually can destroy a business.

Conforti said that the last three years were very difficult for her and her family, as she lost nearly 70 percent of her customers.

“We barely survived, but now it’s all behind us,” she said. “Apparently, many people supported us, and were happy with the verdict. Enough is enough.”

Conforti, who describes herself as a Messianic Jew, had built her Pnina Pie bakeries in Gan Yavne and Ashdod from scratch. She said her nightmare began in 2002 with an article about her in “Kivun,” a magazine for Messianic Jews in Israel.

“Soon after, the people of the Rabbinate summoned me and told me that my kashrut certificate was annulled because I do not profess Judaism,” she said.

Food prepared in accordance with kashrut guidelines is termed kosher, from the Hebrew kasher, or “fit,” and includes prohibition of cooking and consuming meat and diary products together, keeping different sets of dishes for those products, and slaughtering animals according to certain rules. News of the faith of the owner of the Pnina Pie bakery in Gan Yavne spread quickly, soon reaching extremist organizations such as Yad le’Achim, a sometimes violent Orthodox Jewish group.

“They spread around a pamphlet with my photo, warning people away from acquiring products from my business,” Conforti said. “One such a pamphlet was hung in a synagogue. However, I refused to surrender to them and continued working as usual.”

Four years later, in 2006, Conforti decided to open another patisserie in Ashdod, near her original shop in Gan Yavne, in southern Israel. The business flourished, but success didn’t last long.

“A customer of mine, an Orthodox Jew from Ashdod, visited his friends and relatives in Gan Yavne,” she said. “There in the synagogue he came across a pamphlet from 2002 with my photo on it. In addition to boycott calls, I was also described as a missionary. My customer confronted me, and I honestly told him I was a believer.”

Soon thereafter the Rabbinate of Ashdod withdrew the kashrut certificate from her shop there, she said.

“Pamphlets in Hebrew, English and French about me begun circulating around the town,” Conforti said. “They even printed some in Russian, since they saw that the customers of Russian origin continue to arrive.”

The withdrawal of the certificate from the shop in Ashdod in 2006 was a serious blow to her business. Conforti decided to take action, and her lawyer appealed to Israel’s Supreme Court. Judges Yoram Denziger, Salim Jubran and Eliezer Rivlin ruled that the Chief Rabbinate of Israel overstepped its authority.

“The Kashrut Law states clearly that only legal deliberations directly related to what makes the food kosher are relevant, not wider concerns unrelated to food preparation,” the panel of judges wrote.

In response, the Chief Rabbinate accused the judges of meddling in religious affairs.

Soon after she petitioned the Supreme Court, Conforti said, the Chief Rabbinate had offered her a deal by which it would issue her business a kashrut certificate but with certain restrictions, such as handing the keys of the bakery to a kashrut supervisor at night. Conforti declined.

Tzvi Sedan, editor-in-chief of “Kivun,” said the Supreme Court verdict was paramount.

“It’s important not only for Messianic Jews, but also for every other business owner who has to suffer from the arbitrariness of the Rabbinate,” Sedan said. “But I still want to see this decision implemented fully in reality.”

At press time Conforti still hadn’t received the certificate. She was waiting for a team of inspectors from the Rabbinate to inspect the business prior to issuing her the certificate.

A Jew of Yemenite origin, Conforti said she was raised in religious family but came to trust in Christ following her encounter with a Christian family during a visit to the United States.

“There I found Christ and embraced him as my personal Savior,” she said. “I do not engage in [evangelistic] activity, but if someone starts a conversation about my faith, I will speak openly about it.”

Report from Compass Direct News