Coles adds 20c to the price of milk as war in the Middle East pushes up Australian grocery costs

Coles has increased home-brand milk prices by up to 20c a litre, with Woolworths set to follow as war in the Middle East starts to hit Australian grocery costs.

The price rise will support the company’s bottom line against pressure from higher fuel and operating costs, while some of the revenue will be temporarily passed on to dairy farmers.

Farmers have been calling for higher prices for weeks amid soaring diesel and fertiliser costs and limited supply caused by the US-Israel war on Iran.

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One litre of Coles brand fresh milk has risen from $1.65 to $1.85, with two litres up from $3.20 to $3.55 and three litres from $4.65 to $5.15. Long-life milk has also risen in price.

A spokesperson for Coles said the price increases would cover rising costs for the business and farmers.

“We are passing on the additional costs which have been, and will continue to be, incurred in our dairy supply chain,” the spokesperson said.

“We know rising cost pressures are affecting many Australians, from farmers and suppliers facing higher input costs such as fuel, fertiliser and packaging, to families navigating increases in petrol, energy, insurance, mortgage and rent.”

On Friday, Coles told its home-brand dairy farmers it would temporarily pay an extra 5c a litre on top of their farm-gate price and make one-off relief payments to a combined value of $1m.

Higher milk prices are one of the first direct impacts on household grocery bills from the oil crisis, as businesses struggle to manage rising costs, from transport to plastic packaging.

Norco’s chief executive, Michael Hampson, on Monday announced the co-operative would also increase its milk prices to cover its members across 190 farms.

Norco full cream milk retails for up to $2.90 a litre in major supermarkets but the hikes will leave families paying an extra 30 to 50c a week, Hampson said.

“We need to make sure that we are supporting dairy farmers right now … otherwise, we will see significant milk shortages over the balance of the next 12 months,” he said.

Further price rises would be likely by the end of the year, Hampson said.

Woolworths did not respond when asked about its plans for milk prices on Wednesday. It has indicated it plans to pay its own-brand suppliers more by increasing its shelf prices, the industry’s peak body, Australian Dairy Farmers, has said.

The body’s president, Ben Bennett, said earlier this month that farmers needed a permanent, broad pay increase from supermarkets instead of temporary payments.

“Short-term support helps, but what farmers ultimately need is long-term pricing certainty and a fair return for the milk they produce,” Bennett said.

Aldi has yet to announce broad price increases but a spokesperson said the company aimed to “keep prices as low as possible while maintaining fair relationships with our suppliers”.

Michael Harvey, senior analyst for Rabobank, said prices would probably soon rise for branded milk as well.

“We may see even higher price increases across high protein dairy beverages and yoghurt as the full impact of record whey protein prices has not reached the consumer,” Harvey said.

Coles last increased its milk prices by such large margins in July 2022, when fuel prices were elevated and inflation was taking off – then raised prices a further 5c a litre over the subsequent three years.