Spotlight on Milk Processors at Supply Forum11 May 2012
SCOTLAND, UK - National Farmers' Union (NFU) Scotland placed the spotlight firmly on the behaviour of milk processors when it sat down with Defra Minister Jim Paice at the Dairy Supply Chain Forum in London yesterday (Thursday, 10 May).
Recently, several major milk processors have slashed the farmgate price that many dairy farmers receive for their milk, leaving many producers forced to accept a milk price that languishes well below the cost of production. The two pence per litre price cuts announced by Wiseman, Arla and Dairy Crest left the farmer-owned dairy businesses of First Milk and Milk Link with little option but to follow suit in recent days.
NFUS is adamant that Defra’s proposed code of practice for the dairy sector offers an opportunity to address the significant imbalances that exist in the dairy supply chain by insisting on more meaningful, balanced contracts. If milk buyers fail to come forward with positive proposals, the NFUS would be looking for politicians to legislate in this area.
The Union welcomed the recent joint statement by Mr Paice and Scottish Cabinet Secretary for Rural Affairs Richard Lochhead that recognised the damage done by the recent severe price cuts. Speaking after the Dairy Supply Chain Forum that Mr Paice attended, NFU Scotland Vice President Allan Bowie said: "Without more balanced contractual arrangements between dairy farmers and their milk buyers, many processors will continue to take the easy route to managing their own margins by simply lowering the price they pay to farmers rather than looking to their customers.
"It would be far more positive for our dairy sector if our milk buyers were to react to changing markets by looking for alternative customers or developing alternative products. However, rather than having a long-term vision, too many processors revert to the old habit of seeking short-term gain by cutting the price paid for milk.
"At the Dairy Supply Chain Forum, I repeated our demand that Defra’s much vaunted Code of Practice for the sector must include substantial contractual improvements that bring better balance and fairness to arrangements between farmers and their milk buyers. Where processors drop the price of milk without proper negotiation, justification or agreement – as has happened in recent days - then suppliers should have the option to resign under a shorter notice period. If this is not acceptable to processors, then we have urged our politicians to legislate.
"The political intervention of Mr Paice and Mr Lochhead last week was both welcome and timely. Mr Paice has pinned his faith on an effective Code of Practice and we commend his and Mr Lochhead’s commitment to help producers, but we are now at a point where they must deliver. The UK farming unions have worked very hard with the processor’s umbrella organisation Dairy UK, but we have yet to establish a meaningful and long-term outcome. If that position continues then we would look to our politicians to legislate.
"NFUS continues to believe that the solution is two fold. Firstly, we desperately need more meaningful and constructive relationships within the supply chain, which the code can underpin. In addition, we are investigating the potential for producer organisations. Secondly, and crucially, the UK dairy sector must develop ambitious plans to develop new products and markets to add to our current strengths.
"We are working hard with partners in Scotland to investigate the many opportunities that exist for the dairy sector here. Long term prospects for milk and dairy products – both globally and at home – are good and we would encourage those with ambition for growth to work with us.
"We recently supported the Defra 2020 vision for the dairy industry, but were clear that the next few months would test the commitment of other parts of the dairy supply chain. The spotlight is on them. If they fail to support an effective Code of Practice and continue to mismanage the current market pressures, then we will continue to miss the opportunities that exist and the 2020 vision will be mere rhetoric."
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