Dairy merger concern from farmers

Farmers have raised concerns about the impending merger between two of Australia’s largest dairy processors.

The Australian Competition and Consumer Commission (ACCC) has approved the merger of Lactalis and Fonterra.

The planned takeover would see Lactalis acquire Fonterra's consumer, dairy ingredients and food service businesses.

Bracknell-based dairy farmer Grant Archer has supplied milk to both Lactalis and Fonterra and says he is “up in the air” about the merger.

“An advantage would be that we’re getting a company buying Fonterra that knows a lot about dairy manufacturing,” Mr Archer said.

“But with fewer players in the industry, you wonder about that lack of competition and what impact that has on milk prices.

“I’m a bit torn about whether it’s going to be good or not.”

Mr Archer said there was already a limited pool of dairy suppliers operating in Tasmania.

“Cadbury would only take on an extra milk supplier if they retired or lost a supplier; they aren’t a big player.

“We used to supply Bega, but after they took over Lion, they didn’t want us because we have seasonal production and they want year-round milk.”
“From our point of view, there is only Saputo, Fonterra and Lactalis at the moment.”

Milk prices for the start of the 2025-26 financial year had increased, which Mr Archer said was necessary due to his costs rising at “a rate of knots”.

“Another worry is that there is a shrinking milk pool in Australia and even Tasmania.

“We were going gangbusters but we’re a bit steadier as she goes now.

“I don’t know whether there is enough milk to go around for all the suppliers and we are seeing rationalisation of companies because of declining milk production.

“That’s an ongoing concern for the industry.”

Australian Dairy Farmers ADF President Ben Bennett said the ACCC’s decision risks further weakening processor competition in Tasmania.

“Combining two major buyers reduces choice and bargaining power for farmers,” Mr Bennett said.

“That’s a major threat to farmgate prices, especially in a shrinking milk pool.”

The ADF is calling for court-enforceable undertakings to protect farmers.

These include no forced exclusivity in contracts with farmers, honouring all current Fonterra milk contracts, guaranteeing the continued operation of key processing sites and committing to regular dairy code compliance audits.

Mr Bennett said that without them the industry risks further processor consolidation that hurts farmers and undermines supply security.