Farmers and the country’s competition authority have expressed alarm about a deal that may see a big supermarket control a significant portion of the milk supply chain. Farmers have expressed concern about Coles’ plan to purchase the milk processing facilities in Saputo.

For $105 million, Coles wants to purchase two Saputo-owned fresh milk processing plants in Laverton North, Victoria, and Erskine Park, New South Wales.

According to Coles, each facility has the capacity to handle 225 million litres of milk annually and already processes “Coles Own” brand 2 and 3 litre milk products.

Farmers are concerned that the agreement will give Coles excessive power over the price of milk.

Rick Gladigau, president of Australian Dairy Farmers, stated that his members were against Coles’ purchase of the Victorian facility, according to the Australian Competition and Consumer Commission (ACCC), is not expected to result in reduced market competition.

However, Mick Keogh, the deputy head of the ACCC, expressed alarm over a decline in NSW’s raw milk competitiveness.

“These plants are very important in terms of the total processing capacity available, particularly in New South Wales.”

The ACCC is concerned that Saputo, one of the largest dairy processors in Australia, may withdraw from the NSW fresh milk market, increasing the market strength of the enormous retailer.

Given the limited availability in Saputo, Mr. Gladigau concurs.

“They might just go, ‘For 20 million litres, we’re out of here’, and that’s another competitor out of the market.” he said.

Considering that Coles is currently paying well, many dairy producers have moved to supplying them.

“It’s fantastic that they’re paying a really good farmgate price, and they are one of the probably higher payers there,” Mr Gladigau said.