Dairy farming businesses are feeling the pain following a downturn in global dairy commodity prices being translated into damaging farmgate price cuts. NFU Milk Board Chairman Aled Jones has said retailers and processors are taking advantage of the volatility.
Support for dairy farmers from the public, processors and retailers is vital after farmgate milk prices have fallen by around 25% in recent months.
Speaking today at the Welsh Dairy Show, Jones, a dairy farmer from Caernarfon, said that the current situation was causing significant financial strain and called on the rest of the supply chain to take action to support milk producers at this time.
Mr Jones said, “Processors and retailers need to do more to deliver a sustainable milk price back to Welsh dairy farmers. There are a number of pricing models in the liquid milk sector that do this but with the majority of milk in Wales processed into cheese we urgently need to see these models expanded into milk that is destined for the domestic cheese market.
“Milk and milk products that are being processed and sold in the UK should not be suffering the level of price cuts we are seeing. Retailers and processors supplying the UK market should not be taking advantage of the volatility seen on global markets to cut milk price.”
Farmers for Action, who have been planning a series of protests over the falling milk prices, said they were 'miraculously receiving phone calls' from milk processors and retailers saying maybe prices will stop falling.
"Retailers crawling out of the woodwork claiming not to have taken any farmers' money and so on. That should not be a surprise to anyone. For the last 15 years this has been the normal responses from the guilty parties as soon as farmers start to put the pressure on," the organisation said.
We need to keep it up and we need to intensify the protests, if we are to stop any further price cuts and start to get farmgate prices up as fast as they went down. No matter what your view on protesting this surely must get everybody at the protest sites.
"Examples of what has been done in the last 10 days by our so called friends, the British retailer:- insulting adverts on TV cheapening the value of your hard earned British milk, displacing British cheese off the shelves replacing with cheaper European product, cheapskate adverts in national newspapers.
"One retailer removes 2,500 tonnes of British quality cheese for Irish, pressure being put on milk price tenders to get them even lower for a failing retailer and quotes by one milk processor of a £55m loss, no mention of the £35m trading profit, no mentions of all the acquisitions that have been made in one financial year. Clever accountancy? We need to make a stand to get sustainable milk prices, no one else is going to do it."
Aled Jones continued, “This to me is highlighted by the fact that whilst farm gate milk price has plummeted we have seen the average retail price of a kilo of cheese increase by 3.8% in the year ending to 17 August 2014, retailers need to explain how this can be the case.”
“Where cheese and other processed milk products produced from Welsh milk are being sold on by retailers as ‘Welsh’ or ‘British’ then we need to see transparent pricing structures being developed that recognise that these products are being sold on the home market and therefore the price should be determined by the retail price and not based on global commodity markets.
“Retailers and processors, through dedicated supply chains, need to show long term, meaningful, commitments with their producers that benefit all parts of the supply chain. This type of relationship will secure a long term supply of a world class product to retailers and protection from damaging market volatility to the primary producer.
“With regards to milk that is processed to supply the liquid market I am concerned at the impact current retail price wars on bottled milk is having. Processors and dairy farmers must not end up paying the price for retailers fighting for increased customer support through their liquid milk offer. This is a real worry particularly for those producers supplying retailers and food businesses who do not have determinable milk pricing mechanisms. As a Union we will be watching the situation closely and will not shy away from holding to account those who may seek to take advantage of the current situation.”
Mr Jones also recognised the need to grow the market for dairy products, “As a supply chain we must work together to build markets for our produce, working together to increase the proportion of Welsh and British Produce on retail shelves, looking wherever possible to open up and build new markets for milk products overseas.
“Consumers have a hugely important role to play as well, the public provided unfailing support to dairy farmers throughout the 2012 SOS Dairy campaign we ask that they back us again through looking for Welsh milk and dairy products or through products that carry the Red Tractor logo.”
Shrinking funds must mean less red tape says Shadow Minister
On the eve of the Welsh Dairy Show, Shadow Agriculture Minister Llyr Gruffydd AM has called on the Welsh Government to offset the increasingly difficult economic challenges facing Welsh farmers by doing more to reduce red tape.
The Plaid Cymru AM said: “Farm incomes in Wales dropped by 44% last year and since then we’ve seen a 10% cut in the overall EU CAP budget, a maximum 15% transfer out of direct payments to Welsh farmers along with confirmation of an exchange rate that reduces the value of subsidy payments by 7%. Throw in the on-going issues in the red meat and milk sectors and many Welsh farmers are facing unprecedented financial challenges.
“Under such circumstances the Welsh Government has to do everything possible to allow Welsh farmers more flexibility to make their businesses work. I share the frustration of the industry at the slow implementation of many of the recommendations in the Working Smarter Report produced by Gareth Williams nearly three years ago. The Government must seriously accelerate the drive to ease many of the bureaucratic burdens that are strangling the industry.
“When any business is faced with such financial pressures it must be given as much flexibility as possible to adapt, survive and eventually emerge stronger. Government has a key role to play here.
“Top of the list must be the scrapping of the six day standstill rule. This is where businesses are effectively locked-down for six days after animals are brought on to the farm. Introduced over a decade ago the rules as they stand have served their purpose. Allowing farmers to introduce on-farm quarantine units would now be a more proportionate approach that would lift a very restrictive burden to farm businesses.
“This was a clear recommendation of the Working Smarter report and three years later we’re still waiting.”
Other examples of possible changes to red tape include implementing the proposals to simplify the livestock movement rules within the complicated and confusing County Parish and Holding (CPH) system.
On the issues facing the dairy sector Mr Gruffydd said: “It’s clear that the dairy sector faces a protracted period of price volatility. Whilst much of this is driven by global factors there is more we can do in Wales to help our dairy farmers. Funding through the Wales Rural Development Programme and other sources must be used to develop supply chains that can minimise the volatility faced by the sector. We also need to re-double efforts to encourage local processing of more added value produce.
“Encouraging procurement policies that better support the Welsh dairy sector should also be a key priority of government and other public bodies. New EU procurement rules for example will have a greater emphasis on environmental considerations. Sourcing local milk and dairy produce could therefore benefit everyone.
“Supermarkets must also play their part and not use the price drop to increase their margins. During the horsemeat scandal the supermarkets made promises to support the farming industry and this is an opportunity to show they are true to their word.”
Mr Gruffydd also said there was room to strengthen the voluntary dairy code to better protect farmers.
“Whilst I understand the need to strike a balance between protecting suppliers and allowing processors to be sufficiently responsive to the markets, the fact that 12 EU countries now provide for compulsory contracts suggests it should be considered again.”
In recent weeks Mr Gruffydd has held meetings with with farmers in Carmarthenshire, Wrexham, Anglesey and Meirionethshire and held discussions with representative of FUW and NFU Cymru. He has also visited the Dairy Development Centre at Gelli Aur, met representatives of First Milk at their Haverfordwest facility in Pembrokeshire, and held talks with European Commission representatives and MEPs during a visit to the European Parliament in Brussels.
