Supermarket giant Woolworths has announced it will remove the 10-cent milk drought levy it has been paying to dairy farmers since 2018 by the middle of this year.
Woolworths said the almost four-year-old drought levy will be phased out due to easing drought conditions and rising milk prices.
The supermarket wrote to farmers through milk processors Fonterra, Lactalis and Bega on Friday to advise them the levy on its own-brand two and three litre fresh milk would be scrapped by the end of June.
The move means Woolworths will stop paying the 10-cent per litre levy to farmers via milk processors from July.
Farmers will continue to receive the 10-cent per litre levy through milk processors until the arrangement ends this financial year.
“As drought conditions have eased and farmgate milk prices have increased by around 15 per cent since 2018, we will be phasing out the special drought levy ahead of the new milk year in July,” Woolworths dairy director Jason McQuaid said in the letter.
In a media release, NSW Farmers Dairy Committee Chair Colin Thompson thanked Woolworths for transparency on the removal of the drought levy, but said more needs to be done on delivering fair milk prices.
“The irrational dollar-a-litre pricing model nearly killed the dairy industry, we cannot let that happen ever again,” Thompson said.
“It’s starting to look like the big supermarkets and their customers understand the value of supporting our local dairy industry, but there is a degree of disappointment among dairy farmers that the drought levy was not rolled into the base price,” he said.
He stressed that fair, market-based pricing that recognises the true cost of production is what dairy farmers need for a sustainable future.
The Woolworths’ Drought Relief Range was created back in 2018, originally as a temporary measure to support struggling farmers in drought-affected areas on the eastern seaboard.
Related: Twenty-four farmers receive $2m from Woolworths Dairy Innovation Fund
with news from AAP