Report Into Welsh Dairy Industry

A report published earlier this week, highlights the commercial pressure faced by the dairy industry in Wales, which has forced one third of dairy producers to quit the industry since 2003.

2 December 2009

3 minute read

The report entitled, 'Inquiry into the Dairy Industry' gives a brief overview of the European situation. The report states that milk prices in some Member States have halfed over the last year. In response, the Agriculture Commissioner increased intervention purchasing and export subsidy measures.

The number of dairy cows in Wales fell 6.9 per cent, from 2004 - 2008. UK farmgate milk prices fell by 10.9 per cent from July 2008, when they were to July 2009. However, an increase of 2.2 per cent, to 22.99 pence per litre (ppl) was seen in July 2009.

Despite this increase of 2.2 per cent, UK farmgate milk prices were still 10.9 per cent lower than July 2008, when they were 25.82ppl.

Since 2005, over 900 redundancies have been announced within dairy processing in Wales. Over half of these were in 2009, with the collapse of Dairy Farmers of Britain in April, and First Milk announced redundancies earlier in the year.

Since the closure of the Dairy Farmers of Britain plant, there is no large scale bottling operation in Wales.

In November 2007, a Strategic Action Plan for the Welsh Dairy Industry was published. The plan identified ways in which all those working in the supply chain, including processors and producers can work together, with the Welsh government, to respond to challenges.

At a meeting in October, a number of industry leaders including National Farmers' Union (NFU) Cymru, Farmers' Union of Wales (FUW), First Milk, Rachel's Dairy, Llaeth y Llan Village Dairy and the Dairy Strategy Group highlighted the main issues in the industry.

These issues and conclusions were as follows:

Pricing: NFU Cymru pointed out that supermarket margins had increased significantly, whilst prices paid to producers fell. Terrig Morgan of the Dairy Strategy Group said that an independent ombudsman is needed to ensure fair play between the supplier and the retailer. This, he and other industry leaders believe, would cut out any malpractice.

Eifon Huws of the FUWs said: "10 years ago, the supermarkets were making 6.6p profit on a litre of milk, but today, that figure is 16.5p."

Nick Fenwick, FUW, raised concerns regarding the development of regional monopolies which he didn't believe healthy for competition.

NFU Cymru suggested that a dedicated supply chain for the increasing number of milk in Wales which goes into cheese production, would help. A deidcated cheese supply chain would create a link between the producer and retailer to give a fair market price to the producer.

State aid: NFU Cymru raised concerns that the decision by the European Commission to allow member states to increase the level of state aid they gave farmers from €7,500 to €15,000 would be anti-competitive.

Capacity: Milk production in Wales is at a 40 year low. Currently, there are only 2,093 milk producers in Wales, compared with 3,977 10 years ago.

The collapse of Dairy Farmers of Britain, has also had a large financial impact on the industry, resulting in financial problems for a number of producers. Mr Burchell suggested that the lack of substantial milk processing in Wales was due to poor infrastructure and stronger areas of demand elsewhere.

Creating demand for Welsh products: Mr Burchell pointed out that it was all very well creating a super efficient dairy industry in Wales, but unless consumers wanted to buy Welsh products, there would be no market, which would in turn create another crisis.

He said that recent market research had shown that it was difficult to market Welsh products outside of Wales, Gareth Roberts of Llaeth y Llan Village Dairy confirmed this. They felt there was an opportunity to create a brand and develop the image of Welsh food, in the UK and Europe.

Paul Flanagan, First Milk said that they were trying to move as much as possible into branded products. He said that it was possible to increase profits substantially through branded cheese.

Also discussed was the need for investment, increased access to information and improving skills and training in the industry.