Woolworths has announced plans to permanently increase the price of milk with the extra cost to be passed onto dairy farmers.
The supermarket giant and rivals Coles put up the price of their two and three litre milk varieties in September as a temporary drought relief measure.
From tomorrow, Woolworths will remove $1 per litre milk from all stores around the country with its own brand milk to sell for $2.20 and $3.30 respectively.
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Woolworths Group CEO Brad Banducci said the move would deliver higher prices to more than 450 dairy farmers.
“We believe the long term sustainability of our dairy industry – and the regional communities they help support – is incredibly important for Australia,” Mr Banducci said.
Woolworths’ decision comes after discussions with the industry which provided a bleak outlook for dairy farmers still coping with the drought.
“This is affecting milk production and farm viability, which is devastating for farmers and the regional communities in which they live. It’s clear something needs to change and we want to play a constructive role in making this happen.”
The temporary price increase announced in September has delivered $5.8 million in relief to more than 285 dairy farmers who supply milk to Woolworths.
“The Drought Relief Milk payment model has worked on the eastern seaboard and is the most effective way to guarantee price increases end up in the pockets of Australian dairy farmers.
“While we’re realistic this won’t solve broader structural issues, we hope it will help inject much needed confidence into the sector and the regional communities dairy farmers do so much to support.”
Dairy farmers have rallied against $1 per litre milk ever since the supermarket giants started their price war in 2011, arguing the cheap price was unsustainable.
Australian Dairy Farmers CEO David Inall has welcomed Woolworths’ move, describing it as a ‘game changer’.
“It is reassuring that Woolworths has committed to deliver the full 10 cent increase back to those farmers who supplied the milk into that product category,” Mr Inall said.
“Removing $1 milk is not just intended to restore farmers’ financial confidence, but it will also boost confidence in regional communities and small businesses that rely on the industry.
Coles is yet to announce if it will follow Woolworths’ lead.