Perth’s new apartment market recorded its strongest quarter of sales since Q4 2021, with 412 apartments sold in Q1 2026 and a record quarterly sold value of $537 million, according to Urbis’ latest Apartment Essentials results.

Urbis said the March quarter result reflects strong, highly product‑specific demand across both ends of the market, from more attainable projects delivering at scale, through to premium stock being absorbed by equity‑rich downsizers.&nbsp;

David Cresp, Partner at Urbis, said the key story in Perth is not demand, it is the market’s ability to convert demand into delivered housing.&nbsp;

“This is the strongest sales quarter since Q4 2021, and it reinforces that demand in Perth is real and it’s local,” David Cresp said. “But the task now is delivery, turning that demand into projects that can actually be built and completed.”&nbsp;

[smartcode_project:default project_id=110291 project_image_fid=302785]

<h2>Affordable product leads, premium demand remains resilient</h2>

Sales in Q1 were led by more affordable projects, with The Boulevard (SKS Group) recording 115 sales in the quarter, the presentation noting this is only the second time a single project has surpassed 100 quarterly sales. The project was able to offer more affordable housing product right next to a train station.&nbsp;

Palmyra West (Finbar) also delivered strong results with 28 sales in Q1, following 84 sales in Q4, with an average price of under $800,000, underscoring depth of demand for well‑located, attainable new stock.&nbsp;

At the premium end, Urbis said downsizer demand is continuing, with the results highlighting Romeo (Applecross, Finbar) recording 75 sales and reaching almost 50% sold in one quarter.

Jual (Shenton Park, Celsius Property) also posted a strong quarter with 28 sales, reaching 39% sold in one quarter.

Urbis noted that Perth apartment demand is not speculative, not investor‑led, and not uniform, describing it as localised, often equity‑driven and highly product‑specific, a pattern reflected in the polarisation between strong “attainable” performers and premium downsizer product.&nbsp;

[smartcode_project:default project_id=148957 project_image_fid=364102]

<h2>Prices underpinned by costs, and the delivery risk is growing</h2>

Urbis said pricing pressure is cost not demand‑driven: construction costs and delivery risk are now a central constraint, with the results noting build costs remain elevated and volatile, and that energy, fuel and labour uncertainty weigh on feasibility.

David Cresp said a growing challenge for private Build‑to‑Sell developers is simply securing a builder in the current environment.

“Developers are really feeling the pressure from a building market that was operating at capacity and securing a builder is challenging,” David Cresp said, adding that even where a builder can be secured, “trying to get to the price that makes the development financially viable is incredibly challenging in the current market.”&nbsp;

Urbis’ broader WA commentary also notes that industry remains at or above capacity with lot and housing creation, and that many builders are limiting new sales to manage stretched workforces and fixed‑price contract pressures, conditions that flow directly into apartment feasibility and delivery timing.

[smartcode_project:default project_id=108869 project_image_fid=317905]

<h2>Supply: improving later, but still constrained, and Perth lags eastern benchmarks</h2>

While near‑term supply remains constrained, Urbis’ forecast shows completions lifting “Supply is forecast to be back above 1,500 apartments per annum for the first time since 2019”, with 1,775 completions forecast for 2026, and volumes remaining above that level over the following years.&nbsp;

Looking further ahead, completions are forecast to reach 2,500 in 2028, with the report noting 32% of that total is social/affordable, reflecting the role of government‑supported delivery in rebuilding the pipeline.&nbsp;

However, Urbis said Perth remains behind comparable markets on pipeline scale. In a national comparison of projects under construction, the report shows under construction Perth Build‑to‑Sell (BTS) at 3,446 apartments versus the Gold Coast at 7,922. Mr Cresp said “The challenge for Perth is how to we grow the delivery pipeline”.

Urbis’ conclusion is that Perth’s market is increasingly defined by product discipline and delivery certainty, with the research identifying “delivery certainty is key” and calling out builder risk and procurement models as core success factors, alongside “timing and staging”.&nbsp;

Joel Robinson

Perth apartment sales hit strongest pace since late 2021 as builder capacity tightens

<a href="https://www.apartments.com.au/developers/sammut-developments">Sammut Group</a> has secured development approval for its latest Brisbane apartment project, marking the Sydney developer’s next step in expanding its Queensland pipeline following the success of its debut Gold Coast development, Coast.

The approved project at <a href="https://www.apartments.com.au/new-apartments/44-glen-road-toowong-qld-4066">44 Glen Road, </a><a href="https://www.apartments.com.au/developments/toowong-qld-4066">Toowong</a> will deliver a 15-storey riverfront apartment building with 42 residences, significantly increasing the scale of the site’s previous approval for a smaller luxury scheme. Designed by Bureau^proberts, the development will comprise a mix of predominantly four-bedroom and two-bedroom apartments positioned to maximise Brisbane River and city views.

Sammut Director Julian Sammut said the group had been actively searching Brisbane for several years before identifying Toowong as the right fit.

“Brisbane was the right step for Sammut,” Sammut said.

“With the success of Coast we thought we should definitely look to do more in Queensland alone. We then pushed up to look at Brisbane. We've been looking for I'd say two to three years actually and it was hard to find the right location.”

<img alt="Sammut makes Brisbane apartment play" data-entity-type="" data-entity-uuid="" src="https://res.cloudinary.com/dz9xllyip/image/fetch/f_auto,c_limit,w_1440,q_75/https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/field/image/Screenshot%202025-12-23%20at%203.27.14%E2%80%AFPM.png?VersionId=dYAVIL7qdcGA8ojvkslSrLjczXFejSSx" />

Sammut said suburbs including New Farm and Teneriffe were considered before the group ultimately focused on Toowong due to its strong downsizer demographic and limited supply of developable riverfront land.

The site was acquired off-market after what Sammut described as a lengthy negotiation and planning process, with the developer pursuing an uplift to the original approval.

“We are DA approved now which is very exciting,” Sammut said.

“We've had our change approval come through and we've obviously doubled the height, 15 storeys plus rooftop. We've got 42 amazing apartments that are going to be coming to market soon.”

<img alt="Sammut makes Brisbane apartment play" data-entity-type="" data-entity-uuid="" src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,dpr_2.0,q_auto:good/https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202025-12-23%20at%203.27.26%E2%80%AFPM.png?VersionId=ohkRkY0dIZlqdfME2EZePsCQavRiBadE" />

Bureau^proberts said the design responds to Toowong’s evolving urban character, balancing contemporary apartment living with the area’s established residential identity.

“A place where traditional Queensland living has taken place for centuries; Toowong is seeing a shift of contemporary influence, commercial and retail hubs mixed with well-considered residential offerings – all the while maintaining its character and charm,” the architect noted in planning documents submitted to Brisbane City Council.

The architecture practice said the project’s form was shaped by its riverfront setting, flood considerations, neighbouring building scales, and view corridors.

“They said the mix of four and two-bedroom apartments capture the ‘fundamental qualities of Queenslander living,’ translated into the context of a contemporary subtropical building.”

The development sits just off Coronation Drive within walking distance of Toowong’s retail precinct and the upgraded Regatta ferry terminal, while also benefiting from proximity to the incoming green bridge connection to West End. Sammut said the accessibility and amenity offering were central to the site’s appeal.

The approval adds to growing residential activity along the Toowong riverfront, joining nearby projects including Consolidated Properties’ Monarch Residences and Spyre Group’s ARC Residences.

Sammut secures approval for debut Brisbane apartment development in Toowong

Developer Lanevick is heading back into Sydney’s apartment market after focusing more heavily on the luxury townhouse and terrace sector in recent years.

Lanevick, founded and directed by Steve Maroun, is expecting to receive approval in the coming months for a new apartment development in Gladesville, with the aim to launch it to the market later this year.

The 51-apartment project, designed by Studio Johnston, will comprise a mix of one-, two-, and three-bedroom apartments positioned toward the Hunters Hill downsizer market.

“Traditionally it’s been difficult for people in that market to downsize because there just hasn’t been the right product available,” Maroun said.

“We’re targeting buyers who might have 30 to 40 per cent of their house value sitting in the bank after downsizing.

“They still want good spacious entertaining areas, they still want quality design, but they also want flexibility and the ability to enjoy life a bit more after working hard for a long time.”

The project sits near Boronia Park and within close proximity to the Parramatta River foreshore, an area Maroun says offers more of a Hunters Hill lifestyle than a traditional apartment precinct.

“From a lifestyle perspective, it’s really more Hunters Hill than Gladesville,” Maroun said. “You’re close to the foreshore, close to parklands, and still connected back into the village precinct.”

From level four and above, apartments will capture water views&nbsp;toward Sydney Harbour. Communal amenity will include rooftop entertaining areas, wellness spaces, and a gym tailored toward owner-occupier buyers.

“We’ve really designed these apartments around that buyer coming from the Hunters Hill LGA and what they’re actually looking for in their next chapter.”

The proposed development has also been designed to respond to the changing character of the broader Gladesville town centre, where a growing number of mixed-use and residential proposals are expected to emerge over the coming years.

“Gladesville presented a rare opportunity to deliver a genuinely design-led residential project within an evolving lifestyle precinct, just moments from the growing Gladesville town centre, and we’ve approached the project with a strong focus on architecture, liveability and long-term community value,” Maroun said.

Maroun said Lanevick saw a first-mover advantage within the precinct as planning controls continue to evolve to accommodate greater housing density.

“We think there’s a real opportunity there that hasn’t really been serviced properly yet,” he said.

“There’s going to be a broader evolution of the whole Gladesville village precinct over time, particularly with more activation and mixed-use outcomes.”

The Venus Street proposal will include a commercial and retail component at ground level designed to contribute to that evolving streetscape activation.

“A big part of the thinking was how do you activate that area properly and create more vibrancy and amenity, which is what Hunters Hill has been looking for,” Maroun said.

Lanevick’s focus since 2020 has largely been on smaller-scale luxury townhouse and terrace developments. The developer recently completed Royale Randwick, also designed by Studio Johnston, where prices reached $3.65 million. The project was featured in the UDIA NSW 2026 Professional Development Prospectus and was also named a finalist for Development of the Year.

&nbsp;

Lanevick to cater for Hunters Hill downsizers with new Gladesville apartment development

Property developer One Living, backed by former Macquarie banker turned investment manager Chris Green’s investment firm, has unveiled plans to bring more institutional capital into housing to help address the national supply crisis.

The New York-based investor has focused his firm, GreenPoint Partners, on addressing the supply shortage hitting middle market housing in Australia.

It is backing the new One Living business to develop more than 1000 units along the eastern seaboard. The new firm is starting with a development on Mona Vale Road, on the border of Mona Vale and Pymble, in Sydney’s Northern Beaches, with around 140 apartments planned. They are eyeing off more sites across the city.

With cost pressures rising in the industry, One Living’s model is to be a vertically integrated developer-builder, so it can respond directly to the housing gap by removing the cost inefficiencies embedded in traditional residential delivery.

“We are building a platform designed to operate at scale and starting in a market where there’s a clear need for quality, attainable housing,” One Living joint managing director Joseph Scuderi said.

“It’s that missing middle – it’s that attainable end of housing… that’s what most Australians invest into and what Australians can actually afford.”

<img alt="Mona Vale" data-entity-type="file" data-entity-uuid="798dfa93-4941-4db6-a696-31e9dc18e81c" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%202.31.50%E2%80%AFPM.png?VersionId=mKBqi5C_DmeiXS.AtJkcR8LQIxqCqmFi" />

GreenPoint Partners brings years of experience assembling and scaling real estate operating businesses across major markets. And Green sees a big opportunity in Australia.

“For its size, sophistication and importance to the community, Australia’s living sector has remained largely under-institutionalised, which represents significant opportunity,” Green said. “GreenPoint identified that gap, assembled the right team, and is backing One Living to build a platform that is aligned to market needs.”

Green said being a builder-developer would give the company the capacity and flexibility it required to deliver reasonably-priced homes.

“We want it to be at that attainable level; not super high end luxury but at that attainable level,” he said.

<img alt="Mona Vale" data-entity-type="file" data-entity-uuid="74a5344a-4b26-4d4a-ada3-056b1220be77" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%202.32.15%E2%80%AFPM.png?VersionId=vY8hXHO4reBMdO8ZXMWCNtGZJofUPQ3j" />

&nbsp;

One Living will undertake a component of affordable housing in its schemes, which it will own and operate, and it could also run build-to-rent on some sites.

Green praised local policy settings.

“The NSW government is being very supportive, strategic and pragmatic in terms of how do we generate more supply of housing,” he said. “We think it’s actually positive for development and the bit that’s been lacking at that attainable level is that it’s lots of relatively small private developers, whereas we want to create an institutional platform.”

One Living is also&nbsp;looking at high-density projects and could take on more institutional funding in the future.

“The way we will be able to achieve economies of scale is through size,” Green added.

One Living enters Sydney's new apartment market with Northern Beaches site acquisition

It's been several years since there's been an opportunity to buy a brand new townhome in Melbourne's coastal suburb of Mordialloc. Even apartment developments in recent times have been few and far between in the area.

Local developer LDS Property identified the gap in new housing, securing a site on White Street, directly opposite&nbsp;Woodlands Golf Club Mordialloc. They've recently launched&nbsp;<a href="https://www.apartments.com.au/new-townhouses/wm-residences-mordialloc-102-white-street-mordialloc-vic-3195">WM Residences</a>, just 13 townhouses which they have already started building.

Projects by Buxton Director Heath Thompson, who is selling WM Residences, says the townhouses x that perfect middle ground be

"Mordialloc residents have had limited options to downsize within the suburb, often forcing them to look elsewhere despite long-standing ties to the area," Thompson says.

"With very little comparable new supply coming to market, projects like WM Residences are well placed, particularly as buyers look to capitalise on current conditions amid constrained supply."

[smartcode_project:default project_id=134646 project_image_fid=6109]

The development, designed by regarded architecture firm&nbsp;<a href="https://www.apartments.com.au/architects/ewert-leaf">Ewert Leaf</a>,&nbsp;adopts a deliberately restrained architectural approach, focusing on simplicity, durability and liveability rather than overt design gestures.

The boutique scale is central to the offering. With only 13 three-bedroom residences, each home is configured to prioritise functional layouts and everyday use, supported by private terraces and secure two-car garages.

Ewert Leaf’s design response leans into a calm, neutral material palette. Interiors are defined by oak flooring, white walls and soft finishes, creating a consistent and understated backdrop. The approach avoids trend-driven detailing in favour of longevity, with an emphasis on natural light and spatial clarity.

[smartcode_project:default project_id=134646 project_image_fid=6110]

Beyond aesthetics, the homes are designed to meet contemporary performance expectations. Each residence targets a minimum 6-star energy rating, incorporating double glazing, comprehensive insulation and all-electric Bosch appliances.

The project’s location supports a walkable coastal lifestyle, sitting within close proximity to Mordialloc’s foreshore, Main Street retail strip and the train station. Local cafés and dining venues, including Suburbia Deli and Hendriks Café, are within a short walk, reinforcing the area’s established neighbourhood character.

[smartcode_project:default project_id=134646 project_image_fid=6116]

While <a href="https://www.apartments.com.au/developments/mordialloc-vic-3195">Mordialloc</a> is often defined by its beach and pier, the project taps into other areas of day to day living, offering easy access to local food, casual dining and transport, rather than positioning itself purely as a lifestyle retreat.

WM Residences reflects a continued trend across Melbourne’s coastal suburbs towards smaller-scale, design-led townhouse developments, particularly on infill sites where proximity to amenity is already established.

With construction commenced prior to its market entry, the project aligns with a growing preference among buyers for developments with visible progress and defined delivery timeframes.

[smartcode_project_cta:default project_id=134646]

WM Residences fills gap in Mordialloc townhouse market

Milk Prices

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GUEST OBSERVATION
The supermarket giant Woolworths this week broke ranks and announced it was going to stop selling A$1 per litre milk. It will now charge A$1.10, or <a href="https://www.woolworthsgroup.com.au/page/media/Press_Releases/woolworths-to-transition-out-of-1-per-litre-fresh-milk-in-support-of-a-more-sustainable-australian-dairy-industry/" target="_blank">A$2.20 for two litres</a>.
Chief executive Brad Banducci made it clear that there was <a href="https://www.propertyobserver.com.au/https://www.abc.net.au/news/rural/2019-02-18/woolworths-will-stop-selling-%241-per-litre-milk/10820954" target="_blank">more to the decision</a> than straightforward economics:
"We’ve heard the outlook will continue to be extremely tough for dairy farmers… This is affecting milk production and farm viability, which is devastating for farmers and the regional communities in which they live."
The Labor Party has been threatening to impose <a href="https://www.propertyobserver.com.au/https://www.abc.net.au/news/rural/2019-02-20/labor-to-set-milk-floor-price-if-elected-in-2019/10827322" target="_blank">a minimum farm-gate price</a>.
Will what Woolworths is doing help farmers? Only a bit.
Milk prices are internationally set
The so-called “milk wars” began on Australia Day 2011 when Coles announced it was <a href="https://theconversation.com/milk-wars-pointing-the-finger-at-coles-and-woolworths-529" target="_blank">cutting milk prices to A$1 a litre</a>.
Woolworths and Aldi followed suit.
The milk market does not just consist of dairy farmers, supermarkets and customers. There are also the processors – companies such as the ASX-listed Murray Goulburn, Parmalat, Lion and Fonterra – that stand between farmers and supermarkets. Then there is the international market for dairy products like butter, cheese and milk powder.
The biggest determinant of farm gate prices in Australia is not what the major supermarkets do, but world dairy prices.
The <a href="http://www.agriculture.gov.au/ag-farm-food/meat-wool-dairy/dairy#the-dairy-levy" target="_blank">Department of Agriculture</a> says 37% of Australian milk production is exported.
Add to that the roughly 35% that goes into locally consumed butter, cheese and milk powder that is subject to competition from imports. You can quickly see the prices of nearly three-quarters of the milk produced in Australia are set globally.
<a href="https://www.businessinsider.com.au/milk-price-debate-australia-2016-5" target="_blank">Dairy Australia</a> has a higher estimate. Because even fresh milk is subject to foreign competition, it believes 90% of the annual movement in farm-gate prices comes from changes in international prices.
Those changes are beyond the effective control of Australian farmers and regulators.
Many of them are the result of changes in the exchange rate.
International prices are generally set in US dollars. That means a rising Australian dollar can cut the return to Australian farmers, while a falling Australian dollar can enhance it.
Processors get the cream
It is tempting to think an increase in retail prices, like the Woolworths 10 cents, would help farmers. But it normally wouldn’t, much.
Someone between the cow and the customer would get the 10 cents, but not necessarily the farmer.
When the <a href="https://www.accc.gov.au/system/files/1395_Dairy%20inquiry%20final%20report.pdf" target="_blank">Australian Competition and Consumer Commission</a> examined the dairy industry last year it:
<ul>
<li>did not obtain any evidence that supermarket pricing, including $1 per litre milk, has a direct impact on farm-gate prices</li>
<li>Further, farmers’ lack of bargaining power means they are unlikely to benefit from an increase in the retail (or wholesale) prices of private label milk or other dairy products</li>
<li>Even if processors were to receive higher wholesale prices from sales to supermarkets, this does not mean the processors will pay farmers any more than they have to.</li>
</ul>
This time it will be different. Woolworths says “every cent of the increase will end up with Australian dairy farmers”. The processors <a href="https://www.woolworthsgroup.com.au/page/media/Press_Releases/woolworths-to-transition-out-of-1-per-litre-fresh-milk-in-support-of-a-more-sustainable-australian-dairy-industry/" target="_blank">have guaranteed it</a>.
Normally there would be no guarantee that an increase in the wholesale price would flow through to farmers. The processors could pocket it, and the inefficient ones could use it to stay in business, to the long-term detriment of customers.
Consumers are at one end of the line…
Banducci said Woolworths was “acutely aware of the budgetary pressures facing many of our customers and have not taken this decision lightly”.
He is right to recognise it will hurt customers.
It won’t, mind you, hurt customers who buy branded milk like a2 – <a href="https://a2milk.com.au/our-farms/?gclid=CjwKCAiAkrTjBRAoEiwAXpf9CcIT_IidGCd1H_yQd3TGWwoUIFISo770LtzmvP_EZ7Nw_NN0APGSMRoCzbsQAvD_BwE" target="_blank">whose marketing success under chief executive Jayne Hrdlicka</a> has pushed the value of the company to <a href="https://www.afr.com/business/retail/fmcg/a2-milk-posts-record-firsthalf-results-upgrades-guidance-20190219-h1bh1g" target="_blank">A$10 billion</a>, making it bigger than Lendlease, Medibank Private, the AMP and Coca-Cola Amatil. Not bad for a company that didn’t exist at the turn of the century.
Instead it will hurt customers who can afford it the least. For a typical family of four with <a href="https://www.abs.gov.au/ausstats/abs@.nsf/Lookup/by%20Subject/4364.0.55.012%7E2011-12%7EMain%20Features%7EMilk,%20yoghurt,%20cheese%20and%20alternatives%7E17" target="_blank">average milk consumption</a>, the extra 10 cents a litre works out at about A$40 a year.
…and farmers at the other
Dairy farming is difficult, and much of Australia is less than ideally suited to it. Farmers have to contend with volatile prices, drought and isolation.
They are the least powerful players in the “value chain” that runs from cows to customers via importers, processors and supermarkets.
Neither government intervention nor higher retail prices can do much to help them.
Richard Holden, Professor of Economics, UNSW
This article is republished from <a href="http://theconversation.com" target="_blank">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/vital-signs-why-more-expensive-milk-wont-help-farmers-much-112145" target="_blank">original article</a>.
</body></html>

j.ballantyne1990-6AQqhLzZaK

Why more expensive milk won’t help farmers much: Richard Holden

<html><body>
Woolworths will scrap its $1 dollar-a-litre milk in support of a more sustainable Australian dairy industry.
From tomorrow, Woolworths will remove $1 per litre milk from all stores around the country with its own brand milk to sell for $2.20 and $3.30 respectively.
Woolworths has announced plans to permanently increase the price of milk with the extra cost to be passed onto dairy farmers. 
Woolworths Group CEO Brad Banducci said the move would deliver higher prices to more than 450 dairy farmers.
Dairy farmers have rallied against $1 per litre milk ever since the supermarket giants started their price war in 2011, arguing the cheap price was unsustainable.
There was an <a href="https://www.facebook.com/775904401/videos/10156967043899402/" target="_blank">emotive video last week</a> from the daughter of a South Australian dairy farmer who was farewelling the herd as they abandoned the farm.
Casey Treloar, from South Australia, a third generation dairy farmer saw her facebook go viral with emotional farewell video.
The supermarket giant and rivals Coles previously put up the price of their two and three litre milk varieties in September as a temporary drought relief measure. 
Australian Dairy Farmers CEO David Inall welcomed Woolworths’ move, describing it as a ‘game changer’. 
“It is reassuring that Woolworths has committed to deliver the full 10 cent increase back to those farmers who supplied the milk into that product category,” Mr Inall said. 
“Removing $1 milk is not just intended to restore farmers’ financial confidence, but it will also boost confidence in regional communities and small businesses that rely on the industry."
Coles is yet to announce if it will follow Woolworths’ lead.
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Woolworths scraps $1-a-litre milk to support Australian dairy industry

<html><body>
GUEST OBSERVATION
Australia’s federal agriculture minister, David Littleproud, has called for a boycott of supermarket-branded milk. He is angry about lack of support for a “milk levy” of 10 cents a litre wanted by the dairy industry to support drought-stricken farmers.
Fellow National Party colleagues have called for nothing less than a royal commission into the supermarkets’ support for farmers. Nationals leader, and deputy prime minister, Michael McCormack, has said he is open to the idea.
Amid intense price competition across many supermarket categories, the price of milk stirs passions like nothing else.
But calls to boycott supermarket-branded milk are misguided; and a royal commission would not be money well-spent.
The widely held belief that supermarkets are hurting dairy farmers by driving down the price of milk is incorrect.
It overlooks basic supply chain dynamics and the findings of the 18-month-long inquiry by the Australian Competition and Consumer Commission, which was ordered by then federal treasurer Scott Morrison to investigate the low milk prices paid to dairy farmers.
Indirect relations
Looking at the supply chain for fresh milk helps show why the retail price of supermarket-branded milk does not determine the price paid to farmers as some claim.
There are many players within a food supply chain: producers, processors, wholesalers, retailers and consumers.
<hr>
<a href="https://images.theconversation.com/files/241784/original/file-20181023-169816-xw6s3p.png?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=1000&amp;fit=clip"><img src="https://images.theconversation.com/files/241784/original/file-20181023-169816-xw6s3p.png?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=754&amp;fit=clip" alt=""></a>
Fresh dairy supply chain volume map: <a class="source" href="http://www.agriculture.gov.au/SiteCollectionDocuments/ag-food/food/national-food-plan/submissions-received/foodmap-an-analysis-of-the-australian-food-supply-chain-30-july.pdf" target="_blank">Department of Agriculture, Fisheries and Forestry</a>
<hr>
Dairy farmers typically sell their milk to processors, who then sell to supermarkets. There is a relationship between the supermarket and processor, not supermarket and farmer. Whether the supermarket sells a litre of milk at $2, $3 or $4 has no direct relationship on the price the processor pays to the farmer.
In the words of <a href="https://www.accc.gov.au/publications/dairy-inquiry-final-report" target="_blank">the final report</a> of the competition watchdog’s Dairy Inquiry, “the farm-gate price paid to farmers for milk used to fulfil private label milk contracts is not directly correlated with private-label milk retail prices”.
Blame dairy processors
The ACCC’s report does identify a range of market failures due to bargaining power imbalances and information asymmetry, but these are crucially between dairy farmers and processors.
Dairy farmers’ weak bargaining power means any higher price paid by supermarkets to processors would not necessarily result in higher farm-gate prices. The ACCC report notes that farmers get no more money for the milk that is sold at higher retail prices (such as branded milk).
Processors, not supermarkets, set farm-gate prices in response to market conditions (global and domestic demand), at the minimum level required to secure necessary volumes. Farmers are not paid according to the type or value of the end product their milk is used in. They are paid the same price for their raw milk regardless of what brand goes on the container.
<hr>
<a href="https://images.theconversation.com/files/241787/original/file-20181023-169831-1kibwcv.png?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=1000&amp;fit=clip"><img src="https://images.theconversation.com/files/241787/original/file-20181023-169831-1kibwcv.png?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=754&amp;fit=clip" alt=""></a>
Distribution of revenue from sale of private label vs branded fresh drinking milk: <a class="source" href="https://www.accc.gov.au/system/files/1395_Dairy%20inquiry%20final%20report.pdf" target="_blank">ACCC Dairy Inquiry</a>
<hr>
Also blame consumers
Supermarkets are under pressure to keep food prices low, particularly on staples such as bread, milk and eggs. This is evident from the fact that campaigns to get shoppers to exercise their power as ethical consumers quickly run out of steam.
In April 2016, for example, national attention on the plight of dairy farmers led to a campaign encouraging shoppers to leave “supermarket branded milk” on the shelves. In a single month the supermarket brands’ share of milk sales dropped from 66% to 51%. Then it began to rise again. Within a year it was back to nearly 60%.
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Adding to confusion
While a milk levy to directly help farmers during the drought has many supporters, the disconnect within the supply chain means it is near impossible for retailers to pass the money directly to the intended beneficiaries. That, again, depends on those who buys the milk from the farmers – the processors.
Despite this, and because the ACCC inquiry’s findings have so far done little to dispel myths about the price of milk, retailers such as Woolworths have seen it as prudent to embrace the levy idea and publicly demonstrate support for dairy farmers.
All the additional proceeds from its “Drought Relief” milk go back to processor Parmalat, who is responsible for distributing the money to suppliers in drought-affected areas. Coles, meanwhile, has slapped a 30 cent levy on its three-litre milk containers, with the funds going to the Coles Drought Relief Fund.
These measures arguably add to continuing confusion about how the milk market works and the relationship between farm-gate and retail prices.
In the court of public opinion the supermarkets probably had no option but to go along with the charade.
A minister for agriculture, however, should know better.<img src="https://counter.theconversation.com/content/105300/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important; text-shadow: none !important;">
Gary Mortimer, Associate Professor in Marketing and International Business, Queensland University of Technology
This article is republished from <a href="http://theconversation.com" target="_blank">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/supermarkets-are-not-milking-dairy-farmers-dry-the-myth-that-obscures-the-real-problem-105300" target="_blank">original article</a>.
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Supermarkets are not milking dairy farmers dry: the myth that obscures the real problem

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<img src="https://counter.theconversation.edu.au/content/60184/count.gif" alt="The Conversation" width="1" height="1">
GUEST OBSERVER
A fall in the farm gate price of milk and the pain felt by dairy farmers as a result, has many pointing the finger at supermarkets for discounting the price in the so-called “milk wars.” However the suggested solution of raising the price we pay for milk to pass on more profit to farmers is misguided.
Supermarkets have been driving down the cost of basic goods like milk since 2011. But the actual underlying culprit for the fall in prices has been the global glut of supply relative to demand driving down the world price, with only a partial offset from the decline in the Australian exchange rate.
Others have advocated for a return to the regulation of the 20th century with a domestic price set at a premium, or retailers selling branded milk at a premium and returning a share to dairy farmers. In reality, the likely income gain from increasing prices for domestic milk sales would be small.
Australia’s current industry policy is to let market forces set prices, investment and employment across different sectors and industries, rather than government “picking winners” and subsidising selected industries. Setting prices for the dairy industry, would be a return to the “bad old days” with a risk of a decrease in farm productivity.
<h2>Market Context</h2>
About 25% of farm milk production goes to fresh milk sales for domestic consumption. In turn, about a half goes to supermarkets where the store brands, sold for a dollar a litre, account for a bit over half of all supermarket sales. Some branded milk sells for nearly double the store brand milk.
If more people switched to buy a more expensive brand of milk, how many would it take to make enough returns to save dairy farmers? At the moment the maximum amount of milk sold for a dollar a litre would represent about 8% of current farm production.
The remaining 75% of farm milk is used to manufacture a range of products, including butter, cheese, skim milk powder and whole milk powder. Roughly half of the butter and cheese is exported, and 70% of the milk powder. Australia imports cheese as well as exports. The Australian dairy industry depends on the world market for much of its production.
Another aspect that determines the returns for dairy farmers is the world price for manufactured dairy products, adjusted for movements in the Australian exchange rate. If supermarkets raised the farm gate price of milk above that which other countries pay for milk products, processors would switch from manufacturing these products to processing milk instead.
By the same argument, if some retailers are paying farmers above the export parity price, competitors will bid milk away from exporters and undercut the high payers to drive prices back to export parity. That is, the export price provides both a floor and a ceiling to the price which supermarkets can negotiate.
Australian dairy product exports represent a small share of world trade of dairy products, and a very much smaller share of world production. While it would be an oversimplification to say Australia doesn’t have a stake in setting the global dairy price, a 10% or 20% increase in Australian exports would require a very small export price reduction.
<h2>A return to ‘the bad old days’</h2>
Set prices for dairy products, and other agricultural products, were phased out as a part of economic reform in the 1980s and 1990s for a more productive economy and the reasons for this remain valid today.
Setting a price for domestic sales, in this case milk, above the export price leads to a battle between different parties and lobby groups as to what price to set, it may also influence consumers' decisions as to what they buy and arguably some more than others. It could also shift more resources on farms into the dairy industry, chasing a higher price and away from other types of production (which are set by a global price) such as meat or horticulture.
For those dairy farm households facing poverty as a consequence of the slump in world prices, it is more direct and effective to provide direct household support than to artificially increase the product price for all dairy farmers.
John Freebairn is professor, Department of Economics, University of Melbourne and author for The Conversation. He can be contacted <a href="https://theconversation.com/profiles/john-freebairn-90" target="_blank">here</a>.
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jchancellor-FAypfDUnLy

Higher supermarket prices for milk won’t necessarily help farmers

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<img src="https://counter.theconversation.edu.au/content/57114/count.gif" alt="The Conversation" width="1" height="1">
GUEST OBSERVER
Agriculture Minister Barnaby Joyce has announced a package of concessional loans and facilitation of access to assistance for the beleaguered dairy industry.
The government will make available immediately A$55 million in concessional loans for Murray Goulburn and Fonterra suppliers, and access to $500 million of such loans over 2016-17 and 2017-18. These recovery loans will be for terms of ten years.
They will be funded by expanding the drought concessional loan scheme to include criteria that are specific to the dairy industry.
Dairy farmers have been squeezed as milk processors Murray Goulburn and Fonterra cut prices after they over-estimated returns from exports. Farmers have been faced with having to pay back advances that had already been given to them.
There has been considerable public support for their plight, with some consumers favouring the higher-priced brands of milk rather than the cheaper home brand in supermarkets.
The government has resisted calls for a levy on milk.
The government says opposition agriculture spokesman Joel Fitzgibbon was consulted in the development of the package under the convention of the “caretaker” period. But Fitzgibbon rejected this. “A vague letter last Friday might be Barnaby Joyce’s idea of consultation, but it is not mine,” he said.
The package includes a number of other measures, focused especially on helping farmers get access quickly to assistance.
There will be $900,000 for an extra nine rural financial counsellors in Victoria, Tasmania, South Australia and New South Wales, and $900,000 to Dairy Australia to continue rolling out one-on-one business advisory support under the Tactics for Tight Times programs.
Applications for the Farm Household Allowance will be fast-tracked, with a decision made almost immediately in cases of real hardship when the necessary information is available. Case officers will be available to talk with the farmer’s accountant or financial adviser to speed up obtaining the information.
One-stop-shop mobile service centres are now travelling through dairy areas of Victoria and South Australia to give direct access to a full range of government services.
A Dairy Industry Liaison Officer will be appointed to work on the ground with farmers and communities to co-ordinate support and services.
Joyce said that in a sign of “strong confidence in the industry’s future”, a re-elected Coalition government would commit $20 million to build the upgrade of the Macalister Irrigation System in Gippsland. This would upgrade the 1920s and 1950s era Southern-Tinamba area irrigation network, delivering almost ten gigalitres in water savings that could be put back into growing the region’s agricultural production, he said.
The Coalition would also work with the industry to establish a commodity milk price index, to help ensure the domestic industry did not in future find itself in a situation where processors unexpectedly reduced farm gate milk prices late in the season.
“The index would introduce greater transparency and market signals in domestic and global milk prices. The Coalition will consult with the industry on the design of the index that would provide dairy farmers with valuable information for use in supply negotiations with processors and to assist in following international price trends,” Joyce said.
Fitzgibbon said he supported everything that was in the package but it was not enough. It fell well short of farmers' expectations and they would be “bitterly disappointed”.
He said the key issue was delivering a cash flow improvement but the package “does very little for cash flow” and so would be of little assistance.
Michelle Grattan is professorial fellow, University of Canberra and author for The Conversation. She can be contacted <a href="https://theconversation.com/profiles/michelle-grattan-20316" target="_blank">here</a>.
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Dairy farmers get $555 million in concessional loans

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<img src="https://counter.theconversation.edu.au/content/59607/count.gif" alt="The Conversation" width="1" height="1">
GUEST OBSERVER
The history of the dairy cooperative Murray Goulburn and its farmer suppliers shows how a close relationship of trust has developed and been broken with the collapse of the farmgate milk price. Roots of the current crisis can be traced all the way back to the deregulation of the dairy industry at the start of the century.
Murray Goulburn was founded in Victoria in 1950 and grew steadily over the next two decades to become the nation’s largest dairy company by 1973. In its 2015 annual report it recorded total assets of over A$1.84 billion and total revenues of A$2.88 billion. It holds a large portion of the dairy market, in 2016 it was estimated by IBISWorld to have just over 42% of the national market for milk powder and 31% of the national market for milk and cream.
Over half its revenue comes from exports, primarily into Asia. It’s also the nation’s largest buyer of raw milk, employing around 2,400 people and with approximately 2,500 members.
<h2>Deregulation and the “keystone” role of cooperatives</h2>
The deregulation of the Australian dairy sector started in 1999 and rolled out over the following year. It saw the repeal of existing state legislation regulating the supply and pricing of milk.
The impact of this deregulation was mixed across Australia but it led to the decline in the total number of dairy farmers, from around 10,000 in 2000 to about 6,061 in 2016. It is likely to fall even more over coming years.
Despite increases in the overall size of dairy farms, most remain small-scale, family owned businesses. Dairy farming requires higher levels of capital investment than most other agricultural sectors, with major expenses being automated milking machines.
Milk is now essentially a global commodity and dairy farmers are price takers. With the need to invest more into capital equipment, fuel and stock feed, profit margins in the sector have been squeezed.
Over the past five years the average profit margin for dairy farms has fallen. Any decline in the farmgate milk price will only put many producers into unsustainable losses unless they can increase economies of scale by having larger herds or lower input costs.
Another consequence of the deregulation of the dairy industry has been the decline in cooperatives. The Dairy Farmers Cooperative was sold to National Foods (now Lion) in 2008, and Bega Cheese demutualised in 2011 and listed on the ASX. Today there are about nine dairy cooperatives active in Australia, the largest of these are Murray Goulburn and Norco Ltd from northern NSW.
A dairy farmer feeds his cows on a QLD dairy farm. Dan Peled/AAP
Cooperatives like Murray Goulburn are different from other businesses. The cooperative should be focused primarily on its members’ welfare and as such it is unusual for them to be able to satisfy the often competing interests of members as patrons and outside investors from the ASX.
A well-run cooperative can be sustainable and profitable. It can serve as a “keystone” business that helps sustain its members. Keystone businesses are those firms that serve as a major buyer or supplier for many smaller “niche” firms, helping to keep the smaller firms more sustainable for an entire industry.
The approach taken in terms of milk supply and pricing is an example. Since the dereguation of the dairy industry Murray Goulburn has effectively set the farmgate milk price across most of the Australian dairy sector. It also takes all the milk its members wish to supply.
This stabilising and coordinating or “keystone” role within the dairy industry has been a feature of Murray Goulburn since market deregulation. Given the size of the cooperative anything that might affect its long term operations will have significant impact on the Australian dairy industry.
<h2>The issue of trust in a cooperative</h2>
Cooperative enterprises are owned by their members who also have a trading or patronage relationship with them. What differentiates them from other businesses is the democratic governance of the business, with member-owners having a say in major strategic decisions.
Management of a cooperative is therefore more complex and the board and executive leadership team must maintain the trust and loyalty of the members to keep the business strong. They also need to balance the member’s interests as suppliers (patrons) and as investors, while encouraging them to see themselves as owners of the cooperative and members of a community of purpose.
The financial strength of the cooperative is only as important as the financial strength of its members. To survive the cooperative must maintain a clear social and economic purpose with the members' interests first and foremost.
Gary Helou, then CEO, was part of a new management team brought into Murray Goulburn in 2011 to modernise and strengthen the cooperative’s leadership. However, his management style appears to have been more in keeping with that of a regular firm.
Recent revelations by Fairfax Media suggest that Helou and the senior management of Murray Goulburn had evidence of declining export sales as early as July last year. However, they continued to promise farmers a “guaranteed” high farmgate milk price and share price.
Although a capital restructure at Murray Goulburn was endorsed by the board it raised some concerns in the financial press and among former directors. The financial crisis that the cooperative has found itself in is something of a self-inflicted wound.
It has sought to “walk both sides of the street” with its ASX listing and overconfident pronouncements of keeping the farmgate milk price at around $6 per kg/MS.
Dairy farmers who are or once were members and shareholders have lost money. Many retired farmers who had their preference shares converted to the ASX listed ordinary shares have seen the value of their stock collapse. For their younger active counterparts the loss of share value is compounded by the lower milk price with many facing debts of A$100,000 to A$120,000.
Former CEO Gary Helou and former CFO Brad Hingle have departed Murray Goulburn leaving the cooperative’s board and Chairman Philip Tracy to face down angry farmers and shareholders, plus a class action led by legal firm Slater and Gordon.
Murray Goulburn’s members have been essentially turned from owners and members of a democratic community of purpose, into suppliers and investors whose share value is linked to the price of a litre of milk. That’s where the problem lies.
This is not necessarily the end of Murray Goulburn, however, they will need to regain the trust of their members and demonstrate that as a cooperative their primary focus is on the well-being of their farmer members.
As a business it must be frugal and focused on delivering its members the best prices at the lowest costs it can. Any investment and growth should be designed to provide its members with the best long term returns to their businesses as suppliers or buyers, not just to see the value of its share capital appreciate.
Of equal importance is the cooperative’s ability to keep its members loyal not just through the prices or dividends that it offers, but because they feel a sense of ownership and being part of a community of purpose that would be lost if the cooperative disappeared.
Tim Mazzarol is Winthrop Professor, Entrepreneurship, Innovation, Marketing and Strategy, University of Western Australia and author for The Conversation. He can be contacted <a href="https://theconversation.com/profiles/tim-mazzarol-1526" target="_blank">here</a>.
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Murray Goulburn saga has roots in deregulation

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<img src="https://counter.theconversation.edu.au/content/59595/count.gif" alt="The Conversation" width="1" height="1">
GUEST OBSERVER
Dairy giants Murray Goulburn and Fonterra played a dangerous game of chicken by hanging onto high milk prices despite the global dairy market volatility.
Even though both cooperatives are shifting responsibility to each other for the fall in milk prices, which is pushing dairy farmers to the brink, they are both at fault for their race to the bottom. Now both will have to work hard to win back the trust of farmers.
The two companies, both cooperatives (although Fonterra has most of its members in New Zealand) compete head-to-head for farmer suppliers in Australia.
Fonterra is the world’s largest dairy exporter accounting for about 40 percent of global dairy trade and is the fourth largest dairy company behind Nestle, Danone and Lactalis with an annual gross revenue of A$17.61 billion, and 1200 suppliers in Victoria, Tasmania and South Australia. By contrast Murray Goulburn has annual sales revenues of A$2.87 billion, 9 percent of the global trade market and has 2500 suppliers in Victoria and Tasmania.
Since 2005, when Fonterra purchased Bonlac the two companies have fought for suppliers in Australia and grown their respective businesses to meet increasing global demand for dairy product. Their resulting pricing models to farmers were assured while dairy prices continued to rise. Farmers accepted claw back provisions - it was never thought that they would be invoked - and the companies accepted loose contractual obligations to supply. The competitive environment that ensued, from which dairy farmers benefited meant that neither company was able to hold the mantle of market leader for long.
The game of chicken was on as early as August, 2015 when Fonterra began reducing its advance payments to New Zealand dairy farmers). Throughout the following eight months Murray Goulburn and Fonterra steadfastly sat behind their respective wheels committed to hanging tough. Much was at stake.
For both cooperatives a reduction in advance payments to their suppliers in March, or earlier would have saved them considerable reputational risk, and in many cases reduced the exposure of dairy farmers to financial failure. Instead they chose not to swerve, but to hang tough, failing to ignore the significant decline in global prices, for which they both appeared oblivious.
While Murray Goulburn swerved first by lowering the milk solid price, they did so far too late. Fonterra swerved last, but by then the events in the international market had raced past the game – leaving both companies’ suppliers stranded with the over-payment problem from which they now suffer. Recklessly both cooperatives thought they could run the gauntlet with global dairy. That they actually did so for eight months is testimony to the merits of market competition.
Where to now for the two beleaguered companies and suffering dairy farmers? The benchmark for corporate behaviour and accepting responsibility for ‘bad’ outcomes was set by Johnson &amp; Johnson in 1982.
The handling of the Tylenol crisis, where a series of poisoning deaths resulted from drug tampering, set the standard for corporate ethics against which all other subsequent behaviours can be compared. Johnson &amp; Johnson took responsibility, took action and set about the recovery – despite not being responsible for the tampering of their product on shop shelves in Chicago.
It will be through remedial behaviour by each of the dairy giants over the next months that these cooperatives will re-cement their relationships with suppliers, as they both try to win over farmers and gain disproportionate market share at the others’ expense. The outcome both cooperatives have been seeking since Fonterra’s market entry in 2005.
Fonterra have reiterated the view that they warned farmers that the price paid did not reflect the collapse in global dairy prices yet appear to have left the responsibility to them to manage.
Worse, Fonterra’s CEO, Theo Speirings, has now defended the price cuton the grounds that their strategy is to repatriate profit for the benefit of their New Zealand shareholders. This overlooks that the majority that of tradeable shares are held by Australian superannuation funds and that Fonterra’s Australian suppliers had to be subsidising their New Zealand counterparts. How else do you explain the 30% increase in farm gate price on this side of the Tasman?
By contrast Murray Goulburn’s behaviour, especially that towards their suppliers, appears far more conciliatory. Murray Goulburn has been transparent about resignations from the board and management; open about reorganisation and appointment of their interim CEO, David Mallinson; and, shared with suppliers the prioritisation of effort.
They have now offered suppliers a Milk Supply Support Package designed to spread the impact of lower milk payments across the next three years. This package sits on the cooperative’s balance sheet - where it should - with no need to take on individual loans at supplier level.
Whether or not either company can emulate the recovery of Johnson &amp; Johnson remains to be seen, but it is reasonable to expect considerable energy, effort and enterprise being expended by them in the months that follow.
Telling evidence will be reflected in market share in 12 months.
This piece has been altered since publication to correct Fonterra’s annual gross revenue, which is $A17.61 billion and Murray Goulburn’s annual sales revenue, which is $A2.87 billion.
James Lockhart is senior lecturer, School of Management, Massey University and author for The Conversation. He can be contacted <a href="https://theconversation.com/profiles/james-lockhart-265538" target="_blank">here</a>.
Danny Dinghy is professor of Dairy Production Systems, Massey University and author for The Conversation. He can be contacted <a href="https://theconversation.com/profiles/danny-donaghy-265818" target="_blank">here</a>.
Hamish Gow is professor of Agribusiness, Massey University and author for The Conversation. He can be contacted <a href="https://theconversation.com/profiles/hamish-gow-265539" target="_blank">here</a>. 
 
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