Retrospective cuts to farmer payments by major milk processors are “punitive and unethical” says Dairy Connect chief executive officer Shaughn Morgan.The dairy industry’s retrospective repayment impost hitting almost two thirds of Australia’s milk producers provides real grounds for dismantling the controversial $1 a litre supermarket milk price, says dairy advocacy body Dairy Connect.

It also wants state governments to legislate to make it unlawful for processors to reclaim payments they have already made for milk collected.

Lifting the house brand milk price implemented by retailers in 2011 would allow a return to more equitable pricing for the whole supply chain said NSW-based Dairy Connect’s farmer group chairman Graham Forbes.

The dairy market badly needed stability and Dairy Connect would be actively advocating price stability, including during talks with federal Agriculture Minister Barnaby Joyce, next week.

“The commercial relationship between processors and retailers needs to strengthen to add value to milk across the board,” Mr Forbes said.

“Dairy Connect will lobby concerned politicians, including Mr Joyce, in a bid to help facilitate amicable negotiations between processors and retailers to stop the farmgate price for milk being destroyed.”

Chief executive officer Shaughn Morgan said NSW, which had only just recovered from the crippling Tier Two milk pricing by milk companies, was not immune from the impact of Murray Goulburn (MG) and Fonterra’s southern Australian farmgate price cuts now shattering confidence across the sector.

Tier Two pricing effectivelyforced farmers to sell their contracted milk to processes for less than it cost to produce once their herd’s output exceeded Tier One volume limits which adjusted year to year.

Now retrospectivecuts to farmer payments by major milk processors were“punitive and unethical”, Mr Morgan said.

The companies involved should scrap their plans to recover funds already paid to producers earlier in the year.

Processors were reaching back in time to “financially clobber” farmers by calling in money already spent on their milk production enterprises on the back of continuing drought conditions in many regions.

“Any financial assistance to industry is welcome but the Coles’ offer of a new retail milk brand with a 20 cents a litre surcharge to go to some producers or the 50 cents a litre surcharge suggested by some farmers on all milk sales would be unsustainable,” he said.

“The real issue is supermarket pricing of drinking milk is unsustainable and these measures reflectthat reality.

“A long-term solution to realistic milk pricing is needed and all players should work together to develop a strategy for the future.”

Mr Morgan said while MG’s milk price collapse and the decision by Fonterra to cut its prices hit Tasmania, Victoria, South Australia and southern NSW, there were serious concerns across the national dairy community.

“We’re actively behind the Australian Competition and Consumer Commission and Australian Securities and Investment Commission reviews of these price cuts and the circumstances in which they occurred,” Mr Morgan said.

“We also applaud the call by Tasmanian Farmers and Graziers’ dairy chief for seeking a wide ranging review and reformation of existing arrangements that allow retrospective payment cuts.”

Average MG co-operative farmer members were reportedly facing repayment bills of about $120,000 for each business – a huge impost on the families and rural economies involved.

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