Milk prices on the up but costs rising too

UK - Things are at last beginning to look a shade brighter for dairy farmers and, over the past ten days, there has been a veritable deluge of announcements from most of the major buyers indicating that they are about to pay more for milk. And not before time too.
calendar icon 9 July 2007
clock icon 2 minute read
The fact is that Scotland now has only around 1,300 dairy farmers compared to more than 3,000 two decades ago. However, those who are left have the second-highest herd average in the EU with 136 cows. Only Hungary, and that is a legacy of the former state farms, has a higher figure. Scottish dairy farmers are in the main hugely efficient; they have had to be to stay in business. But they still need a decent price for their milk to allow for profit and future investment.

Just short of 22p per litre appears to the going rate at the moment from the leading buyers, but it costs most farmers at least 18p to produce that single litre. What producers, and even thinking consumers, just cannot fathom is why there should be such a large gap between farm gate and supermarket checkout. That yawning differential is frequently around 40p per litre, and higher in some corner shops. Incidentally, the most expensive milk that I have come across recently is in the WH Smith store in Edinburgh's Waverly station where commuters in a rush are being charged 50p for half a litre. That is simply outrageous.

The trouble with milk is that it is a must-buy commodity and consumers just pick up containers with very few even noticing the price. Those same shoppers tend to be much more circumspect when they purchase meat, fruit and vegetables. But I think at last the message is getting through and NFU Scotland is to be congratulated for its ongoing "what's on your plate" campaign and its considerable efforts at the Royal Highland Show.

But why should the ex-farm price of milk now be moving upwards? Well, it all comes down to the basics of supply and demand; for the first time in the memory of most farmers, milk is in short supply. That is one of the reasons why the farmer-owned First Milk, which has 2,800 members in Scotland, England and Wales, is offering to pay a bonus on extra production. Milk is becoming scarce and long gone are the mountains of butter and cheese. This is not just a UK or EU phenomena, it is worldwide, with the market being driven by demand in China and the Far East.

Source: Scotsman
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