MDC says industry must work together for profitability

UK - The MDC today backed Waitrose chairman Sir Stuart Hampson’s comments that dairy farmers were under extreme financial pressure, but added there were positive signs the industry was starting to tackle the causes of low farm profitability.
calendar icon 9 November 2006
clock icon 3 minute read

The MDC’s head of economics Ken Boyns, speaking on behalf of the Council, said that if the dairy industry did absolutely nothing then Sir Stuart’s prediction that the UK would be importing liquid milk within five to ten years could turn out to be right.

“However, there is cause for optimism as the industry is starting to tackle key areas that will help develop a profitable future for all.”

He said that the poor profitability of dairy farming was common knowledge and could only be resolved by taking action in three ways.

“We need to make sure milk is produced and processed more efficiently than our competitors; have relationships in the dairy supply chain that allow value to be delivered back to the farmers; and to develop new brands and products to whet the public’s appetite.

“If the focus on these doesn’t continue or we don’t have commitment from all sides, then Sir Stuart could be right – although this would be extreme as the UK would have to lose 50% of its current production to have to import liquid milk.”

Mr Boyns explained further by saying that UK farmers and processors were already likely to be more efficient than their EU competitors at producing milk, plus the UK had some of the most modern liquid milk processing plants in Europe. If this continued to improve then there wouldn’t be a rationale for importing milk.

Better relationships in the supply chain should result in more profitable selling arrangements for farmers – as shown by the Waitrose model of sourcing milk direct from farmers which was paving the way for other retailers, some of whom were beginning to take similar action.

“But the one area in which we need to make more progress – and which is a huge area of opportunity – is market innovation,” said Mr Boyns. “We need to develop new products and brands as quickly as possible to make sure we can get the best returns for British milk.

“The difference between what we import and export in dairy was almost £900m in 2005 – that means we imported dairy products worth £900m more than we sold. What’s worse is this deficit has almost doubled since 2000.

“A significant part of this was cheese. As much as 37% of cheese we consume in the UK is high-value, speciality imported cheese and this is a growing market. The British dairy industry needs to make the most of markets such as this and develop the right products for it.”

Mr Boyns said the short term outlook was incredibly difficult for farmers, but they could be positive about their long term future with the industry working together in these ways.

“I am hopeful that by actions such as Sir Stuart’s, in publicising the issues, and those of Waitrose in setting up sustainable long-term and equitable relationships with farmers, we will not reach the position of having to import liquid milk.” News Desk
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