Why acquisition of milk processors raises concerns for food security: Melina Morrison’s insights

11 April 2023

BCCM CEO Melina Morrison spoke with ABC Radio’s Warwick Long (WL) on Country Hour about Coles purchasing two milk processing plants from Saputo (Listen to recorded interview on ABC Tasmania: 01:39 – 07.51)

Read the transcript below.

Rony Briscoe, Tasmanian Country Hour: First up today, more reaction over the Coles plan to purchase two milk processing plants from Saputo. And a group representing farmer co-operatives says that the supermarket buying two milk processing factories in Australia presents a major food security issue for the nation. Coles has announced its plan to buy the two factories from Saputo for $105 million and become a milk processor as well as a major retailer of milk. Melina Morrison, CEO of Business Council of Co-operatives and Mutuals, wants the competition watchdog to investigate.

MM: From a competition point of view, market competition and from food security, we don’t think it’s a good idea to have strategic assets, after all, that’s what milk is, it’s a stable, owned by anyone other than the producers, because they can robustly bargain for their interests, like farm gate income. And, you know, milk is a staple and that so I guess, Warrick, the competition issues around this need to be carefully considered. You know the fact that.

WL: So you think the ACCC should look at this?

MM: Absolutely. If we think about the long supply chains that we have in Australia, we have a lot of distance between our highly urbanised centres and the centres of food production, and that’s created long supply chains that are often dominated by non-farm farm interests. We need more agricultural co-operative champions like, well in Australia we have CBH, we need more Norcos, the last large scale remaining 100 per cent farmer owned dairy producer. But overseas, we see markets dominated by large co-operatives like Fonterra in New Zealand, ARLA in Europe, Land O’Lakes in the US, Ocean Spray, Danish Crown, I could go on. They’re owned by suppliers who can bargain for their own interests and return to the farm gate. That’s the most important thing. If we want dairy production to be a success, we have to involve the producers. We need to make it profitable to farm.

WL: Is that going to be a hard sell to the people? See, even when they look at the steel from Coles, because there are already so many other milk processors like Taylor, Saputo, Bega and Fonterra, and apart from Bega all of them are foreign owned. A number of small players in the market as well like Norco that you mentioned. So the ACCC won’t necessarily have the power to say there’s a lack of competition in that space, won’t they?

MM: I think the ACCC themselves have looked at that. In fact, they have pointed out that we do have these long supply chains that are often dominated by non-farm interests. And we do have this disconnect between our highly urbanised areas and domestic markets for consumables. We have to remember that we are an island nation and what we experienced during COVID really showed us the need for things like strategic assets, food security and our supply chains to be front of mind when we think about competition. What’s happening here is that the plants that were built by a co-operative originally have been traded away and they’re being passed around like an investment asset rather than a strategic asset. And that’s not a criticism for the players involved. They’re simply doing what their business purpose directs them to do. Again, to say, you know, about agricultural production and the food on our plate, to be a success, we have to involve the producers. And I think the ACCC will take that into account.

WL: You’ve made that point a number of times now, that this is a food security issue. Why is a supermarket buying a milk processor a food security issue for Australia?

MM: Well, again, we have to think about in whose interests are these strategic assets? Thinking back again to this being a food staple, in whose interests are strategic assets being held? The purpose of Coles is to maximise profits for shareholders, not farmers, and they compete by offering lower prices to consumers. I enjoy that as an Australian consumer and many others do. But we need only remember the milk price wars and that drove many farmers to despair. You know, one of our great agricultural co-operative champions is Norco, and they have they are a farmer-owned dairy producer and they’ve just produced a report on the mental health of farmers and it’s found a dire situation for farmers around their well being, with many of them feeling very depressed and being driven to quite extreme, you know, actions because they can’t make a living off the farms. We don’t want milk to go the way of pineapples. We grow them in Australia now we ship them offshore, they’re canned offshore and they’re brought back on.

WL: So in terms of the case of Coles buying its two milk processors, at the moment that deal is subject to ACCC approval, what’s your appeal to the ACCC or political leaders that will be watching this decision closely?

MM: Well, the ACCC will make its determination according to its, you know, its own rules and mindset. But I think the ACCC has already shown that it does understand, very deeply, the need to address, you know, the increasingly long supply chains that are dominated by non-farm interests when it comes to agriculture. I guess the main thing that we all need to keep front of mind, whether we’re regulators, policy makers, consumers, farmers or businesses like Coles, is that this is a strategic asset, it’s a staple food, and we need to ensure that the people who produce the food in the first place are able to control their success in the market. No milk without farmers milking cows.