21 October 2009

2 minute read

Europe

Major retailers regularly tender for their supplies of cheese with the result that there is fierce competition to secure supply contracts and large quantities of cheese are imported from Ireland and other EU member states, says NFY Cymru.

This tendering process generally leads to instability and price volatility as processors cannot commit long term to supplying one particular retailer and this leaves Farm Assured Welsh produce competing for space on supermarket shelves with cheese from countries where production standards may be lower than in Wales.

Mansel Raymond, NFU Cymru Dairy Board Chairman said, “To secure the future of milk production in Wales we need to see longer term commitments from retailers to source cheese from Wales through the establishment of dedicated supply arrangements between producer, processor and retailer. A number of these arrangements have been set up for the liquid milk market but given the fact that only a small proportion of our milk reaches the liquid market few producers in Wales have seen the benefit of such relationships.”

In recent weeks Sainsbury’s has made a commitment to set up a dedicated supply arrangement for cheese with around 140 farmers in the south west of England and Waitrose has pledged to source 100 per cent British on its own label dairy products. Mr Raymond is calling for this type of commitment to be extended across all retailers.

He said, “Without firm commitments from the retail sector to source domestically it becomes increasingly difficult as a producer to plan and invest for the future. At present the strength of the euro against the pound has, to some extent, helped us because it makes imported product relatively more expensive but there is no way that Welsh milk producers can plan their future in milk production around the vagaries of the strength of sterling.

Mr Raymond continued saying that figures published by DairyCo demonstrate that in the year to 12 July 2009 total GB cheese sales increased by two per cent to 385,060 tonnes and the average price per kilo of cheese increased by 8.3 per cent in the same period. He said: "It makes no sense to me therefore that in the same period producer milk prices have fallen."

Mr Raymond concluded, “Consumer interest in quality locally produced cheese products is on the increase but for retailers to be able to continue to source and secure domestic milk to service this market the price paid to the producer must recognise the cost of producing high quality farm assured milk and not be based on the volatility of commodity markets and exchange rate fluctuations.”

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