27 January 2011

3 minute read

Europe

Recent price announcements from the farmer-owned businesses Milk Link and First Milk have shown that returns from products such as cheese, butter and powder are slowly starting to filter back to producers by way of price increases.

However, in the liquid milk market – which accounts for half of all the milk produced in the UK – retailer price wars and processor battles over market share have denied those producers supplying that sector any price boost at a time when costs of producing milk are rising quickly.

The recent price announcement from First Milk, whereby it was able to lift the price to those supplying its cheese contract by 1.25p per litre while those in its liquid pool received just 0.25p clearly highlights the liquid milk log jam that exists.

Milk Committee Chairman, Jimmy Mitchell said: “Milk committee members have explained, in no uncertain terms, that the level of frustration and anger being felt by our dairy farmer members continues to grow by the day. They see dairy commodity prices across Europe and the World rising at the same time as demand for fresh liquid milk here in the UK continues to grow. Yet the impact at farm level here in the UK has been minimal.

“Faced with a cost of production that is in excess of 28p a litre, it is appalling that the vast majority of producers in the UK continue to receive a price that, at 26p per litre, not only falls well short of the mark but leaves them languishing at the bottom of the European milk price league.

“Producers will not stand back and allow that to continue. The small increases that companies like First Milk and Milk Link have started to secure from the cheese and powder markets are welcome and have been quickly fed back to producers. But that must be seen as only the start. We would hope that given the current strength in these markets, much more by way of a price increase is in the pipeline. Such companies also have an opportunity to look at what opportunities now exist to tap into healthy European and World markets and manufacture products for export.

“The very fact that milk prices for those supplying manufacturing contracts are increasing must quickly bring those involved in the liquid sector to their senses. Producers supplying the liquid milk market have been the victims as retailers and processors get involved in battles for market share that have simply driven value out of a premium product like fresh milk.

“The fact that milk purchasers and retailers can continue to dictate the price farmers get for milk and deny producers the kind of return that the market justifies is a clear indicator that long-term things have to change. We need a fresh look at contractual arrangements between milk producers and their purchasers that are better balanced and includes mechanisms so that farmgate prices more accurately reflect the true value of milk.”

TheCattleSite News Desk