Milk Price Cuts Make for Sour New Year

UK - The English National Farmers' Union has recently expressed its disappointment in learning that that 'unjustified' New Year milk price cuts have been announced.
calendar icon 6 January 2009
clock icon 3 minute read
National Farmers Union

Responding to the news that Arla has cut its milk price to farmers by 2ppl and First Milk by 1.25ppl, NFU dairy board chairman Gwyn Jones said: "It's hard to see the justification for any price cuts in liquid milk. I'm not blind to what's happening on world and EU commodity markets and am well aware of the pressure being exerted on the cheese market by lower priced, lower quality imports, but for a large liquid milk processor such as Arla to drop its price so ruthlessly and then blame it on falling commodity prices is very surprising.

"With oil, fuel and energy prices falling at the factory, processors should have more than enough room to cope with the cuts"
NFU dairy board chairman, Gwyn Jones.

"Processors, like farmers, are feeling the pinch and are having their margins squeezed, but with oil, fuel and energy prices falling at the factory, processors should have more than enough room to cope with the cuts required without turning to farmers to bale them out. By being the first to instigate the dragging down of a stable market to recoup its margin Arla is sadly reverting back to type. Why have they done this? Quite simply, because they can.

"It's difficult to talk of partnership in the supply chain when companies act like this, exploiting the poor, one-sided contract with farmers. This is the third example in as many months of how a contract, which allows price cuts to be imposed at will, does not require a period of proper negotiation, or offer transparency on price calculation, leaves farmers vulnerable and at the mercy of their milk buyer."

"We are particularly concerned that these price cuts come at a time when UK milk production has reached a crucial tipping point and when the cost of producing milk remains painfully high."

Despite the reported falls in the price of fertiliser prices are still 75.5 per cent higher than December 2007 with many merchants not passing the full benefit of price cuts back to farmers, many of whom will have bought forward at a higher price to secure supply. Feed prices, which only account for a relatively small proportion of farmers' costs have also fallen, but annual comparisons show that the average price of high energy dairy rations is now only £2/tonne lower than December 2007 and high protein concentrates only £4/tonne lower than the average price in December 2007.

Mr Jones said: "The British dairy industry desperately needs a period of long term stability if it is to regain its confidence and meet the growing demand for British milk and dairy products. At a time when farmers are faced with the huge cost of NVZs, low calf prices, a worsening TB situation, and structurally high input costs milk price decreases only serve to rock the foundation of an already fragile industry.

"The NFU will be launching its Survival Plan in the next few weeks to show leadership to farmers, milk buyers, retailers and Government by setting out remedies and solutions that will provide some relief against these short term pressures."

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