LOYALTY payments are financially disadvantaging farmers and border on anti-competitive behaviour, a Victorian dairy farmer says.
Nullawarre North's Tim Lenehan told a meeting in Warrnambool a fortnight ago farmgate payments for milk and/or incentives paid following the milk supply season - "loyalty payments" - were being used to stop farmers swapping processors.
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Last week, at his 500-cow dairy farm, Mr Lenehan told how farmers seeking a better price for their product risked losing money from milk they had already supplied because if they left at the end of the season they were not entitled to their "loyalty payment".
This payment, depending on farm and processor, could be about 10 per cent of the annual income.
"Our product has to leave the farm every day, unlike industries such as grain and beef," the Bega Cheese supplier said.
"So we should be able to have the opportunity to shop around for a better price without being financially disadvantaged from milk we have already supplied to the company.
"It is definitely used as a tool to stop farmers moving from factory to factory.
"They (milk processors) are using your money for the milk you supplied as a tool to stop you going anywhere."
Tim, with wife Bronwyn and sons Sean, 12, Sam, 10, and Zack, 7, have off-loaded 10 per cent of their most inefficient cows in the herd and cut back on maintenance and upgrades to make it through with low milk prices this season.
"This year we have cut our numbers back 10 per cent, we work on the theory that they have dropped our milk price by 10 per cent, we'll cut numbers by 10 per cent.
"That way we are not feeding the inefficient 10 per cent (of our herd) at a loss."
Loyalty payments have been part of southern dairy farming for almost a decade.
Australian Competition and Consumer Commission didn't respond to The Weekly Times.
