NATIONAL Foods has defended itself against accusations it is sending Tasmanian dairy farmers to the wall.
But a Senate inquiry also heard today that some farmers are at "tipping point'' because of below-cost milk prices being offered by the food processing giant.
National Foods managing director Ashley Waugh told the inquiry his company had a vested interest in keeping farmers viable in the long-term, but there would always be "ups and downs'' from month to month.
Mr Waugh said the company offered a premium of at least three cents a litre above local price setter, Fonterra, with prices reflecting world prices and regional factors.
"We accept our responsibility to farmers,'' he said. `"We're committed to working with farmers for their long-term sustainability and we're continually reviewing our prices.''
Mr Waugh said the company was buying about 30 million litres of milk a year even though there was no viable market for it. `"We might have arguments about price, but we've never not picked up farmers' milk.''
"We're very happy to sit with farmers and discuss milk prices,'' he said.
But Tasmanian Farmers and Graziers Association chief executive Chris Oldfield said National Foods' treatment of its Tasmanian suppliers was "simply not fair''.
"Farmers can usually deal with ups and downs, they're undesirable but understandable,'' he told the inquiry.
"But the current situation is unprecedented, it's totally off the scale....National Foods' current behaviour is simply not acceptable.''
He said the company had offered "take it or leave it'' without proper engagement with farmers.
"We want to work with National Foods to accept the concept of partnership, because we need each other.''
"They need to understand the consequence of their actions, and I don't think they do.''
Prices recently offered to many of National Foods' 90 suppliers in northern Tasmania have currently plunged to as low as 20.8 cents a litre, well under costs of production.
Mr Waugh said it was the company's intention to pay an average of 32.5 cents a litre over the next months, but acknowledged this included contracts still in place from the boom years of 2007 and 2008.
The company also paid premiums of 4-6 cents a litre to farmers who could supply milk in the January-June period.
Mr Waugh disputed farmer claims that the cost of producing milk in Tasmania was almost 40 cents a litre, saying his company estimated it to be 34-35 cents based on a 12-month supply.
But Tasmanian dairy farmer Allan Davenport told the inquiry that some farmers were already at "tipping point'' because of the prices being paid by National Foods. "Catastrophe is not too much of an exaggeration,'' he said.
Dairy industry consultant Penny Williams said the situation was so serious in north west Tasmania that farmers could barely pay their creditors with their current milk cheques, let alone other costs which were continually rising.
She said farmers didn't know what their final milk price for the year would be, how many step-ups they could expect.
Senator Bill Heffernan said he'd been told that a National Foods executive had said at a recent meeting in Melbourne that the company had no responsibility to maintain farmer viability, and that "if farmers make losses, so what??''
Mr Waugh said such statements, if made, were not in line with National Foods policy.
Senator Richard Colbeck also branded "unfair and hypocritical'' a recent letter from National Foods to a NSW school cafeteria saying it was putting up its milk product prices because of "unprecedented increases in the farm-gate milk price''.
