Deadlock on Australian liquid milk prices broken

Published 24 April 19

Top Australian supermarket chains recently increased the price of their liquid milk by 10% to AUD $1.10, with the extra 10c going to farmers. This is the sterling equivalent of an increase from 56ppl to 62ppl (using the 2018 exchange rate).

The increase follows a long running low-price deadlock among the main Australian supermarket chains, who have been selling milk for AUD $1.00/litre for most of the last decade.

UK retail milk prices averaged 60ppl in 2018 following a number of years of downward pressure. The lowest average retail price in this time was 57ppl for liquid milk in 2015, according to Kantar Worldpanel data. However, some products were notably cheaper, with 4-pint bottles being commonly sold at £1.00 or even as low as 89p – that’s 44ppl and 39ppl respectively.

The rising retail price is viewed by the Australian industry as a positive move, potentially helping to restore consumers’ perception of milk’s value, although there is a risk the higher prices could dampen demand. However, the biggest influence on milk prices paid to farmers, both here and in Australia, will continue to be global trends.  Despite differences in the proportion of milk production going directly to exports, farmgate prices in the UK and Australia are not too dissimilar. The higher UK price in 2017/18, while partly due to exchange rates, will have been the result of the premium obtained for EU butter over global prices during the period.

Figure 1:

Market destinations of milk

Figure 2:

Farmgate milk prices Aus v UK