DairyCo Supply Chain Margins Report

UK - Farmers are the biggest losers when it comes to making profits in the dairy industry, the NFU has said – adding that promotional activity has stripped so much value from the sector that retailers are the only winners.
calendar icon 11 October 2010
clock icon 2 minute read
National Farmers Union

DairyCo’s annual dairy supply chain margins report, published this week, shows supermarkets are making increased profits from milk and dairy products at the same time as the majority of dairy farmers continue to receive a price for their milk that sits well below the true cost of production.

During the 2009/10 milk year, the farmgate price dropped by 2ppl compared to the previous year. Retail gross margins increased over the same period.

The average retail price for liquid milk in multiple retailers remained stable in the 2009/10 year at 65.1ppl, compared to the average of 64.9ppl the previous year.

The gap between AMPE and farmgate price is currently the largest it has been for almost three years although with recent increases in milk prices, this gap has narrowed slightly.

NFU dairy board chairman Mansel Raymond said: “These latest figures are a complete vindication of the NFU’s Great Milk Robbery report. As ever, dairy farmers are the big losers and are yet to see their fair share of better market returns.

“During 2009/10 retailers were able to grow their margins at the expense of processors and farmers, who both suffered a fall in gross margins, and despite there being no increase in prices to consumers.

He added: “The lack of an increase in dairy producers’ prices also backs up the NFU’s Great Milk Robbery report, which suggested that money which should be returned to dairy farmers has been used to compete for retail business, and that the level of promotional activity in the liquid milk and cheese sectors has taken value out of the supply chain for everyone but the retailers.

“This adds further weight to the argument that farmers should not be forced to pay the price of ruthless milk promotions, and perhaps indicates a market correction of inflated retail shelf prices.

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