Profits black hole threatens dairy industry - NFU

UK - A survey released by the NFU and the RABDF today shows that the gap between what dairy farmers are paid for their milk and what it costs them to produce it has widened to almost 4p per litre.
calendar icon 11 October 2006
clock icon 3 minute read

The survey looked at the impact that energy cost inflation and the summer drought have had on production costs. Based on returns from over 350 farmers, with an average herd size of 196 cows – twice the national average - it shows costs have increased by 0.78ppl, to around 21p per litre. This compares with an average producer price to the farmers who responded to the survey of just 17.3ppl.

In the light of the survey, the NFU is launching a campaign to encourage dairy farmers to invoice their milk buyers for the extra costs that have been incurred.

At a meeting of the NFU’s Council yesterday (Tuesday October 10), Dairy Board chairman Gwyn Jones said: “The yawning gulf between milk prices and costs is fast becoming a black hole which will swallow up large parts of the UK dairy industry if something isn’t done to reverse the downward price trend in the supply chain.

“I urge all dairy farmers to complete their invoices and return them to the NFU so we can put real pressure on the milk processors and supermarkets. I am confident if all dairy farmers support us on this, we’ll get a result.”

RABDF chairman Tim Brigstocke said: “This survey highlights how dire the predicament of dairy farmers has become. It is imperative the recent exceptional production costs that have been exasperating dairy farmers are recognised and passed further up the supply chain.

“In the past, processors have successfully increased their selling price as a result of raised energy costs. It is about time farmers were treated on an equal footing. There is much hype from supermarkets on fair trade products – is it unreasonable to expect fair trade for British dairy farmers?

“Processors and retailers cannot continue to shrug off the evidence of the drastic need for farm-gate milk price increases and we refuse to let the matter fall under the radar. We will be revising ‘British Milk – What Price 2006?’ again at the end of the current milk year.”

Gwyn Jones added: “In the last year, we have lost over 1,000 dairy farmers in England and Wales, and the way things are going, we will lose another 1,000 over the next year. Production is down month on month, year on year, which is hardly surprising given that producer prices have fallen by 28% in the last 10 years.

“Contracts are at the root of the problem. In fact, they aren’t so much contracts as surrender documents. They impose absolutely no pressure on processors, and allow them effectively to buy shelf space on supermarket shelves – using producers’ money – whenever it suits them. Prices can be cut, even retrospectively; seasonal supply conditions can be changed, even retrospectively. In no other walk of business life would this sort of situation be tolerated. “

Mr Jones suggested that the NFU start work on a standard contract, representing a fair balance between seller and buyer, providing the “commercial leadership” the industry was crying out for.

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