17 September 2009

2 minute read

Europe

Prices could be fluctuating between 15p and 30p for some time, Pat Tomlinson, the head of agriculture at the bank HSBC said during the Dairy Event in Stoneleigh, Warwickshire, this week.

He said that the ups and downs in price were the reality of the market that the country is experiencing at the moment.

He said there are several reasons that prices are fluctuating including global commodity prices for milk, exchange rates, the premiums that were being offered to British farmers, the relative negotiating strength of the milk companies and the strategic moves that these large companies are making.

Mr Tomlinson said that at present the industry is enjoying the benefits of the current exchange rates, which could have seen prices much lower if they had stayed at their levels of last year.

However, he said that the dairy farmer can do little to influence these outside drives on price and the farmer should be looking at costs to be able to ensure a sustainable production.

He said that the farmer can influence the cost of production through his technical performance and through economies of scale.

Mr Tomlinson added that farmers needed to look at technological developments and also embrace best practice principles and benchmarking to ensure an efficient operation.

And he welcomed the increase in the number of farms that are coming together to share best practice principles.

He added that the farmer also needed to have careful financial management controls to produce a recipe for sustainability and a profitable business.

He said that sustainable production should be at least p per litre lest than the price, but farmers should look at the cost of production as a management tool rather than a marketing tool.

"The starting point for success is the control of costs rather than prices," he said.

TheCattleSite News Desk