Government must stop 'ruthless milk discounting'

Ruthless retail milk discounting is not sustainable, and ultimately will damage the sustainability of the UK dairy industry, NFU dairy board chairman Rob Harrison as he gave evidence to the Efra Select Committee on the current dairy price situation.

Yesterday, Arla Foods announced they will cut their milk prices paid to farmers by 1.63ppl from December.

Harrison stated that while the farm gate milk price downturn has been caused as the twin result of increased global production and reduced global demand, there are a number of clear things that can be done to cushion the impact on farm.

"We know that Government can't step in to the market, but they can support our hard working dairy farmers at national and European level. In Brussels they can back the NFU's call for a review of the intervention price for dairy products as well as a targeted re-opening of Private Storage Aid for cheese - something that can help rebalance the EU market. We're also calling on them to continue their work on seeking new export opportunities and promoting our high quality dairy products both within Europe and outside.

"To help push consumption we urge policymakers to improve the labelling of dairy products - to ensure consumers are buying British - and to be more co-ordinated in their health messages and campaigns - dairy products are, and will continue to be a vital part of a healthy, balanced diet. And to help farmers better manage volatility we have called on Government to help develop a farm management deposit scheme and to extend profit averaging to five years, such as was recently announced by the Irish Government

“We would also like to see the remit of the Groceries Code Adjudicator extended down the supply chain to cover farmers' relationships with processors. We believe this would bring better transparency to the impact of the ongoing liquid milk discounting that we're all seeing in our retailers. The NFU has already written to all the major supermarkets to ask the simple question, 'what are you doing to support British dairy farmers', as there are a number of areas that can be improved. A number of dairy farmers are within dedicated supply relationships, but using milk as a loss leader puts downward pressure on the whole industry and while farmers' margins are being squeezed by global and political issues we need our domestic retailers to support our farmers more than ever.

“Today another milk buyer announced farm gate milk price cuts for December. We now need Government to do all it can to support a sustainable supply of milk going forward as we know the public are rightly proud of the high quality dairy products British farmers produce."

Dairy UK told MPs that the government has a key role in helping the dairy industry meet its formidable challenges.

Appearing before the Efra Select Committee, Dr Judith Bryans, Chief Executive of Dairy UK, said: “The UK dairy industry is going through extremely challenging times. These difficulties are likely to continue in the coming months and market conditions will get tougher before they get better.

“These conditions are affecting farmers and processors alike and there is no element of the dairy supply chain that is insulated. Price volatility is the result of an oversupplied global dairy market and poses a severe challenge with tight margins and reduced profits.”

In its evidence to the committee, Dairy UK said that long-term prospects for the industry remain positive and there are steps that can be taken to help in the short and medium term.

Intervention at EU level may be necessary in 2015. Other long term-measures that the Government can help with include minimizing the burden of regulation e.g. sympathetic planning laws; competitive energy costs; supporting the promotion of dairy products; and supporting the actions of the industry with regard to exports.

Dr Bryans added: “The dairy industry needs all the support it can get from the Government to protect existing export markets and develop new ones. We would welcome measures aiming at easing the burden of red tape around exports, such as creating a one-stop shop for export health certification.”