23 February 2010

2 minute read

Europe

Researched by Bidwells Agribusiness, the report provides detailed analysis of the seven largest milk buyers in Britain (by volume of milk processed), providing information on their business strategies and how they are performing against them. Importantly, it also investigates the potential for these milk buyers in terms of milk price and security of demand. It provides valuable information to help farmers in their decision making both in terms of choice of buyer and their own future business development plans.

Ken Boyns, DairyCo Director says: "The report includes a range of questions that producers may wish to ask their milk buyer to help them make better long term decisions about how they farm and where they sell their milk to maximise profitability.

"It does not cover every issue faced by the market or individual companies, but it does provide sufficient detail to identify positive challenges, allow some comparison and increase understanding."

The report forecasts that producers in all regions of the world are being exposed to greater milk price volatility. In such circumstances, successful milk producing businesses in GB will need resilient and flexible structures to withstand market movements, and have appropriate strategies in place to mitigate production and marketing risks. This emphasises the need for full analysis and consideration of buyers' strategies and performance.

Some insights into the companies provided in the report include:

• Which company has a successful, branded cheese and spreads business but lower profitability in its liquid dairies division? How is that company planning to invest in its liquid dairies and doorstep service to improve competitiveness/profitability, and therefore is looking for more direct supply farmers?
• Which company is focusing on improving efficiency in order to rebuild reserves?
• Which company has a strong balance sheet and ability to generate cash, and is looking to recruit more direct supply?

Gwyn Jones, NFU Dairy Board Chairman welcomes the report and says: "For most of the companies covered in this report, the milk they buy from farmers is their biggest single cost, and therefore how successful they are will have a huge impact on the milk price they can pay their producers."

"We would like farmers, and particularly their representatives to look at this report and use it to discuss and question the strategy of their milk buyer, or potential milk buyer, in a constructive way to make sure profits for both parties are maximised."

To provide background and place the information in context, the report also describes the world market as a whole, how this relates to the British market, and the history leading up to the current structure in the processing industry.

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