7 June 2010

3 minute read

Europe

The NFU says it is absolutely clear that the substantial rises in wholesale prices of major dairy commodities such as milk, cheese and cream in the UK should have generated substantial increases in returns for British milk manufacturers.

Speaking at the launch of the NFU’s report ‘The Great Milk Robbery’ today, Friday June 4, NFU dairy board chairman Mansel Raymond said: “I made a promise to our dairy farming members to investigate the dairy market situation and ask serious questions about why farmers are not yet seeing increases in their milk price given the positive market signals.

“The findings of our work not only confirm that farmers have yet to see the full benefit of the rise in the dairy market, but, shockingly, it reveals that the total revenue to processors from dairy commodities in May 2010 was £19 million higher than in May 2009. This is equivalent to an average increase of 4.3 pence per litre which far from reflected in increased returns to dairy farmers. If markets remain at their current level, this will rack up an extra £57 million in total revenue to processors every quarter.

“There are some figures that stand out. Revenue from cream was £34m higher in 2009 compared to 2008 and so far in 2010 a further £36m has been received from cream sales compared to the same period in 2009. Cheese prices have only recently started to rise but have increased by £13 million in the past three months. Eight million of this was in May alone.

“It’s no surprise then that we’ve seen handsome annual profits made by the liquid buyers. It’s in farmers’ interests to have strong processers, but, while Wiseman has at least paid out 0.3ppl since August, Dairy Crest’s cream bonus was short-lived and Arla didn’t see fit to offer anything until this month. It all points towards a competitive log jam that nobody is brave enough to break, and farmers are paying for it.

“No buyer has yet announced any increase of a scale that stands up against our analysis of what farmers should legitimately expect when compared to the increases in revenue that I’ve highlighted. Yet again, because of the woeful nature of milk contracts, farmers are forced to wait until everyone else has finished at the table before coming to sweep up the crumbs.

“I understand that private dairy companies have to consider their owners and shareholders, however, co-ops are there to get the best return possible for their members. I believe those buyers operating in commodity markets should be moving higher and faster on behalf of their producers. Competition for supply will mean that rising milk prices for manufacturing use may force liquid buyers to pay more in order to maintain their priority, but this current situation has certainly set alarm bells ringing.

“So, why are farmers not getting a fair share? Given the total lack of any supply chain transparency only processors can answer this question. My belief is that a combination of time lags, processor costs, competition between milk buyers, too much willingness to offer cheap dairy products in the middle ground, and a lack of loyalty to farmers over shareholders and customers, is to blame. The bottom line is that milk buyers will only pay the milk price they deem necessary to obtain the milk supplies they require.

“We are asking for immediate and substantial increases in farmgate milk prices to reflect the sustained strength of commodities and additional revenue to processors and a fairer approach to milk contracts that allows producers to share in the spoils. We don’t want to be here having the same debate in six months or one year’s time – we need to give serious attention to the way we price milk to safeguard the industry now and for the long term.”

TheCattleSite News Desk