Fair Go, Fair Trade for our dairy farming mates – “Fair Trade Milk”

Host: Dr. Ross Ainsworth

Fair Trade is a global movement which promotes fairness in trading supply chains and is primarily focused on producers of commodities in areas where there has been a long history of poor producers and workers being ripped off by unscrupulous middle men and big corporations. Coffee and cocoa production in third world countries were some of the earliest examples but there are now many others across the globe.

Today, many of our dairy farmers are getting a very raw deal from their supply chains now that dairy commodity prices are at the bottom of another cycle. Through no fault of their own, many milk producers have now been presented with a situation where they are being asked (forced?) to give back some of the margins they received from past sales. This outrageous proposition from large milk processing companies is so absurd and unreasonable that I find it very hard to believe that it is even legal.

Just as the pastoral producers have traditionally been forced to take the price cutting pain every time, dairy farmers find themselves in the same ugly trading environment. But perhaps it doesn’t need to be that way.

A Suggestion –

The small number of retail giants in Australia are always on the lookout for a new marketing edge that will boost their shares and pump their bottom line. Nothing wrong with that as long as it doesn’t cause someone else to go broke in the process, especially if that entity happens to be a small and relatively powerless farmer. $1 milk has been a controversial marketing exercise which I don’t doubt has made money for the retailers but at great cost to the producers of that product. It certainly appeals to a significant number of retail customers but perhaps not all of them.

What if the farmer could get a fair price for their product and the retail giant could make the same margins – or greater – simply by using a different approach to capturing the attention and buying support of the customer? What if the big supermarket offered Fair Trade Milk at $3 per litre? This price (or something like it) would allow everyone in the supply chain to make a juicy margin. This would firstly encourage the supermarkets to join in, it would also help the milk processing companies to fix up their precarious financial positions and finally still have enough left over to pass on a reasonable price to their farmers and allow them to survive and reduce their debit.

It is my view that if the Australian public, who are a generally very decent and compassionate mob, were provided with the facts that dairy farmers were going broke because of the current situation and needed a break from the $1 milk and the processor payback nonsense, that they would support them by buying the $3 milk. Call me naive but it would be a simple and inexpensive proposition to test. Firstly announce to the public through the 7 pm TV news who would no doubt be happy to run such a quirky story, that this Fair Trade Milk was coming to supermarket X in suburb Y tomorrow morning and see what happens. No expensive advertising campaigns required. The talk shows would take it up and social media would take off. The TV crews would be at the milk fridges the next morning to record what happened. Malcolm and Bill would be happy turn up to buy a litre for the cameras and say something nice about Aussie farmers and jobs if they were in the neighbourhood. Even the newspaper dinosaurs would cover it. Landline would run the story the following Sunday.

Offer the concept first to one supermarket chain and give them an edge which is what they always like to enjoy. Just put the $3 milk on the supermarket shelves with a simple sticker added to the normal packages and some advertising around the fridge to show it was Fair Trade Milk and see what happens.Put it in the fridge next to $1 milk and watch the response. My gut feeling is that a significant proportion of Aussie consumers would effectively “donate” $2 to our diary farmers to help them out by buying the more expensive product and leaving the $1 milk in the fridge.

The Cost, almost zero.

The Benefit, potentially huge.

Ross Ainsworth
June 2016

DSCN2530 copyDairy farmers in Malaysia get about $2.50 per litre for their fresh milk!