US grocery giant Walmart is opening its own dairy processing plant supplying milk to 500 stores, and perhaps modelling a next-step pathway for Australian supermarkets.

Walmart will take milk at the Indiana plant from 25 farms, produce half-gallon and gallon containers of whole and skim milk products under its private label brand, US reports say.

“It’s our first entry into food production,” Walmart spokeswoman Molly Blakeman told reporters.

Will Australian supermarkets follow suit and invest vertically?

They will need to invest more in processing plants if they wanted a decently reliable supply chain under such terms, particularly after suppliers have taken a battering due to low prices driven by the supermarkets.

The current practice is for Coles and Woolworths to enter a number of 10-year supply agreements with a variety of processors.

Also, Walmart in this case also got about $US4 million in start-up tax credits, partly tied to hiring plans, as well as a $US10.7 million saving over 10 years thanks to further tax abatements, US reports say.

What are Aussie farmers doing to counter price pressures?

The farmers, based in northern Victoria, are concerned about the future of the dairy industry and have decided to act and form a collective bargaining group, United We Stand.

In less than a month, the group has had 85 million litres of milk pledged from more than 40 farmers, who supply the major processors Fonterra and Saputo as well as Australian Consolidated Milk, Tatura and Parmalat.

Article sourced from http://www.ausfoodnews.com.au/