03-07-2012 11:56 AM | Dairy, News, NFU

Farming associations condemn milk price cuts



The latest round of milk price cuts by the three major dairy processors in the United Kingdom has attracted criticism by farming associations today.

The major dairies supply fresh liquid milk into the UK market place and have issued notices for price reductions.

“This price slash comes at the expense of the average dairy farmer who is now making a significant loss for every litre they produce”, said NFU dairy board chairman Mansel Raymond.

“I echo the call made by one major producer group, Dairy Crest Direct, that this now amounts to a combined profit warning for the overwhelming majority of dairy farmers in this country. All producer representatives must now stand together and fight to restore profitability.”

In the past seven days Robert Wiseman Dairies, owned by Müller Dairies, Arla Foods UK, the UK subsidiary of Arla Foods Amba, as well as Dairy Crest, announced cuts to their milk prices paid to farmers as of August 1 of 1.7ppl, 2.0ppl and 1.65ppl respectively, following further significant cuts in recent months.

Chairman of Dairy Crest Direct David Herdman said: “This latest 1.65ppl cut to our members, which comes on top of a 2.0ppl cut in May, will deliver a completely unsustainable milk price. In fact we estimate the deficit between milk price and production cost to be £53,000 a year for our liquid suppliers. It is for this reason that we are issuing a profit warning loss of £35million, for non-aligned DCD producers.”

Chairman of the Arla Foods Milk Partnership, Jonathan Ovens, said: “Farmers simply cannot afford to go into the winter making a loss of 5ppl.”

Roddy Catto, Wiseman Milk Partnership acting chairman, said: “For the sake of our producers we have no option but to fight this cut – this scale of loss in untenable.”

“Three processors will all cut their milk price on August 1; they all blame deterioration in commodity markets and cream prices - but none of them is taking responsibility for this dire situation,” added Mr Raymond. “For me, this just typifies everything that is wrong with this market place. It is time for liquid milk processors - and retailers and other major buyers - to take responsibility for this totally dysfunctional supply chain. It fails to address the one basic need of any business – the need to cover costs and make a profit.

“It is the aggressive and deflationary nature of price negotiations between retailers and processors that is really hurting. Some farmers receive a cost of production linked to their milk price but for those who aren’t sheltered by such deals the pressure on price is once again unbearable.

“Until all retailers and processors commit to a fair and transparent supply chain, one that ensures a fair return for farmers, we will never break free from this vicious cycle of crisis after crisis in the dairy sector.

“We need action and we need it now. Firstly, processors need to take responsibility and own up to the fact that they have been selling milk so cheaply in the first place and become too reliant on the price of secondary products for income. Second, government needs to sort out the mess that is dairy contracts. This has been promised; now is the time for delivery.

“For my part, I am calling for urgent meetings with all retailers and major food companies that buy liquid milk. This erosion of prices is crippling our dairy industry at a time when it should be thriving. It must stop; the very survival of our industry is at stake.”

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