13 May 2008

3 minute read

North America

NFU Scotland has recognised the lead Wiseman is taking in raising its farmgate price and now expects other processors to follow suit. However, whilst the new farmgate price of 26.2 ppl is an improvement, there is little cause for celebration given that it is still below the cost of production. A recent report concluded that dairy farmers require 29 ppl to cover the costs of producing milk and to allow for investment in the business.

In terms of its full year results, which were also announced today, Wiseman has highlighted that there has been a 40 per cent increase in the farmgate price paid to those who supply the company with milk. This needs to be put in context. The cost to a dairy farmer of producing that milk has increased by at least the same amount over the same period of time and is still increasing.

The annual report also shows a profit margin for Wiseman of 2.53p per litre of milk sold, up from 2.38p last year. This margin is reasonable and significantly lower than the margin being made by retailers on their milk and dairy products. It is at the retail end of the supply chain where action is needed. It is critical that retailers recognise the spiralling production costs at farm level and pay accordingly if they wish to secure their future supplies of milk, cheese, butter and cream.

Willie Lamont, NFU Scotland’s Milk Committee Chairman, said:

“A small number of companies, Wiseman included, have been working hard with their customers to highlight the impact that rising costs are having on their business and the businesses of those who supply them with milk. Others now need to step up to the plate. It is recognised that an upward move in the prices paid to its dairy farmers is required to instil confidence. Robert Wiseman Dairies is the first major milk processor to have announced such an increase and we need others to follow suit quickly.

“Against a background of increasing global and home consumption of milk and dairy products, the outlook is bright for the dairy sector. However there are massive short term cost pressures for farmers who are facing rocketing fuel, feed and fertiliser costs and extremely high prices for replacement cows. These costs need to be recognised now and the Wiseman move is a small step in that direction.

“It’s also worth remembering that consumption increases are not just global. The amount of fresh milk being drunk in Great Britain is 2.5 per cent up on the year and we are eating more and more British cheese. We need milk production to be in a position where it can sustain these increases.

“However, milk production continues to fall. There may be a number of factors behind this but the low level of profitability on dairy farms is key. The solution is simple. If the supply chain pays a fair price for its milk, producers will produce it and we will no longer be faced with the danger that supply won’t meet demand.”

TheCattleSite News Desk