Dairy cattle grazing near Caniaba.
Dairy cattle grazing near Caniaba. Jamie Brown

EXPLAINED: The problem facing dairy farmers in 165 words

HOSTILITIES erupted throughout the nation's supermarket aisles on Australia Day 2011, when Coles slashed the price of milk to $1 a litre.

Woolworths and Aldi quickly retaliated, raising the fury and concern of farmers, who said they would be forced to ditch the industry as supermarkets crunched the profit margins of dairy processors.

That left dairy farmers selling their product below the cost of production.

Seams burst last fortnight as Australia's largest dairy processor Murray Goulburn said it would cut the price it pays farmers from $5.60 per kilogram of milk solids to between $4.75-5.

The problem is the price of production keeps growing while milk prices decrease under the $1 milk campaign's ten year contract.

According to Ross McInnes, the price of milk in south east Queensland has gone up 20% since the early 90s.

"However, the CPI has gone up 79%, the average wage has gone up 153%," he said.

It's forcing farmers to sell milk at 1992 prices on 2016 operational costs.



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