Speaking to supplier farmers in Tangambalanga on Monday morning Lino Saputo Jr said a mandatory Code of Conduct should also outlaw price down grades.

“After reflection and after having talked to suppliers the code of conduct should be mandatory,” he said.

“I’m just hoping the mandatory system will not be onerous in terms of a cost structure that impedes us from paying the highest price we can to the suppliers but I believe that it’s the right way to go and I hope that all processors adhere to it.”

“In fact I would add one element more. I would make it illegal to have a step down in price.”

He also used the Tangambalanga visit to again question the viability of $1-a-litre milk, saying “under the current circumstances” Saputo would not seek to renew its contact to supply private label milk to Coles.

“I don't like to see $1 a litre of milk being sold on the shelves,” the Saputo chair and chief executive said.

Mr Saputo said that pricing did not reflect the time, effort and cost of producing milk and current terms of the contract to supply major supermarkets’ private label milk needed close attention.

While in the North East Mr Saputo confirmed the Kiewa processing plant would not be shut in the “short term or medium term”.

“The Kiewa has got good talent, great employees,” he said. “The plant is currently underutilised so we’re hoping if we collect more milk off the farms we can process more milk through the plant and make it more efficient.

“But added to that, there’s an agreement with Danone … We believe in the joint venture. 

“We have a very good relationship with Danone not just here in Australia but in other parts of the world so I think there could be a great future for the facility.”

Saputo produces cream cheese at the Tangambalanga site, which also processes yoghurt with Danone.

Murray Goulburn started a 10-year partnership with Coles in 2014 to supply milk for Coles private label brands in Victoria and NSW.

“We inherited the contract and we said we would honour the contract but quite frankly the economics don’t make a whole lot of sense,” he said.

“So we will have to have some discussions with the retailers and perhaps add a little bit of discipline to a market that perhaps may not have had some in the past.”

In April this year MG supplier shareholders voted overwhelmingly in favour of selling the struggling dairy cooperative to the Canadian dairy giant.

Nearly 96 per cent of the votes were in favour of the $1.3 billion sale to Saputo.

In 2016 Murray Goulburn also started a five-year national private label contract to supply Coles-brand cheese.

That deal saw a major multi-million dollar upgrade of its Cobram cheesemaking factory.

However things turned sour for Australia’s biggest dairy operator around the same time.

It retrospectively slashed its farmgate milk price and many suppliers walked away.