What do petrol prices in Perth and dairy farmgate prices in Victoria have in common? More than you’d think.
Back in 2017, researchers at the University of Melbourne analysed more than 1.7 million petrol price points from a 15-year time frame across Perth.
They found service station behemoths were pushing the price of petrol up by communicating through prices — and generated 50 per cent higher profit margins as a result.
Lead researcher David Byrne found prior to 2010, Perth petrol retailers engaged in irregular price jumps on all days of the week.
But his research showed that since 2010, Thursday price jumps have become the norm — with one retailer jumping ahead of time on a Wednesday.
“Big players can act like conductors, and smaller players can act like the orchestra,” Dr Byrne said about his Perth research.
The uni researcher while technically legal, the petrol pricing strategy should have received more scrutiny from regulators because it is what economists call “tacit collusion.”
Fast forward eight years to 2025, and switch service stations in the west to dairy farmer kitchen tables in the east.
Last month, Fonterra issued its farmgate price average for southern Australia seven days early.
The price — $8.60 per kilogram of milk solids — was not well received by farmers and their lobby group leaders alike.
United Dairyfarmers of Victoria president Bernie Free said the $8.60 per kilo figure “was not a serious price” and part of Fonterra’s strategy at providing a low-ball figure.
Dairy Farmers Victoria president Mark Billing said the $8.60 figure may be in the short-term interests of processors, but it would do medium and long-term damage to everyone along the dairy supply chain.
Seven days after the Fonterra price confirmation, the rest of the processors filed their milk supply agreements with hours, even minutes, to spare before the Monday 2pm deadline assigned by the Australian Competition and Consumer Commission.
Some farmers are using the phrase ‘collusion’. Legally, that’s highly questionable but that’s not to say it doesn’t mean a tweaking of the code isn’t necessary.
The bowser wowsers from the west and the milk market misers in the east have been fuelled by a common motivation: profitability.
But with drought widespread across southeastern Australia, the farmgate fallout is likely to leave farmers running on empty.
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