Australia competition watchdog to widen dairy investigation

(Fonterra.com)

Sydney | Reuters — Australia’s competition watchdog will launch a broad investigation into the country’s dairy industry, the country’s deputy prime minister Barnaby Joyce said on Thursday.

The investigation comes after Australia’s largest dairy processor Murray Goulburn and New Zealand’s Fonterra Co-operative Group in April reduced their farm gate prices, or what they pay farmers for their milk, by nearly 20 per cent. This new price is below the break-even costs for a number of farmers, leaving many of them financially struggling.

The Australia Competition and Consumer Commission (ACCC) launched an investigation into the timing and notice of the cuts, but Joyce said the ACCC will launch a broader investigation.

“An in-depth and independent inquiry is a thorough and fair way to uncover inefficiencies and inequities that our farmers face — and identify a way forward,” said Joyce, who is also acts as the country’s agriculture minister.

“The ACCC inquiry, to begin in November, will investigate sharing of risk along the supply chain, supply agreements and contracts, competition, bargaining and trading practices in the industry and the effect of world and retail prices on profitability.”

The ACCC is expected to report its findings in the second half of 2017, and in the meantime global milk prices are expected to have rebounded.

Whole milk powder prices last week soared 18.9 per cent and are now 42 per cent higher than lows hit in February.

Murray Goulburn, rival Bega Cheese Ltd. and New Zealand niche processor a2 Milk Co. all met market expectations on Wednesday despite a turbulent year marked by falling prices and sluggish demand.

— Colin Packham is a commodities correspondent for Reuters in Sydney, Australia.

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