Scotland – Land Of Milk And Opportunity

SCOTLAND, UK - National Farmers' Union (NFU) Scotland’s milk committee is extending an open invitation to dairy processors – based at home and abroad – to look at the investment opportunities that exist in Scotland’s milk fields.
calendar icon 5 April 2011
clock icon 4 minute read

Scotland offers some of the most efficient and concentrated milk production in the world. With international dairy markets forecast to remain one of the fastest growing agricultural sectors, Scottish producers are keen to encourage new investment so that producers and processors alike benefit from the buoyant dairy trade.

Global commodity prices set the trend in dairy markets world-wide and there are clearly increased opportunities to benefit ambitious dairy producing regions like Scotland or other parts of the UK. NFU Scotland has raised this issue in private in recent discussions with processors and also at the UK Dairy Stakeholders Forum, chaired by Defra Minister Jim Paice.

NFU Scotland Vice President Allan Bowie said: “Market indications are for increased global dairy product demand, boosted by the requirements of emerging world markets. Given the right incentive, we have the producers and the production here in Scotland that could meet the requirements of any processor looking to tap into the growing demand for milk and dairy products.

“The recent strategic alliance between First Milk and Eilers and Wheeler, one of Europe’s established suppliers of dairy products, is a welcome development that underlines the potential that exists in wider markets.

“However, that alliance is the exception rather than the norm and the processing sector here in the UK in general has not reacted to the world-wide opportunities. Instead, our processing capacity – most of which is not farmer-owned - remains focussed on supplying a retailer-dominated home market with fresh milk and cheese. That currently accounts for 75 per cent of all the milk we produce here in the UK.

“By comparison, our EU neighbours are benefiting from the increased value for dairy products and are enjoying farm gate increases now up to 32p per litre. However, the dysfunctional nature of the dairy supply chain found in the UK means that farmers are only seeing an average price of around 26p per litre despite selling milk into products like fresh milk and cheese which are perceived to be high value.

“Internationally, the main trading commodities are milk powders, commodity cheese and butter. Any investment in processing here in UK not only has the potential to look at such export markets but also has the opportunity, through product development and innovation, to satisfy UK demand for dairy products. That could eat into the growing UK dairy trade deficit, which currently approaches a staggering £1.3 billion.

“Despite the availability of cheap milk to processors here in the UK – the cheapest milk in virtually the whole of Europe - this trade deficit has grown rapidly over the last decade and the figures make stark reading. We import 90,000 tonnes of butter, while we consume 179,000 tonnes and we bring in 411,000 tonnes of cheese, while consuming 673,000tonnes.

“Currently, butter prices are historically high, but the UK consumer is offered and buys vast quantities of Danish, Irish and New Zealand products. Similarly with cheese, we are failing to compete with Irish, French, German and New Zealand imports. We can make cheese and butter, we can make other added value and commodity products and we can produce the milk, so why the lack of ambition?

“The UK imports 40 per cent of its dairy produce, equivalent to about five to six billion litres of milk production – production that Scottish dairy farmers, if given the chance, would like to help produce.

“Seeking investment in processing in Scotland to serve home or export markets is not a pipe dream but a realistic consideration. Contrast our position with New Zealand, a country that produces only slightly more milk than the UK, but which exports more than 90 per cent of its production, mostly as powder, butter or cheese. New Zealand is now managing to pay its farmers a higher milk price than what most farmers are getting here.

“Common sense would suggest, milk can and should processed into the most valuable product as markets dictate. UK processors prefer to continue to produce liquid milk and cheese to a UK market that is so competitive that prices are regularly forced down to levels too low to sustain either processor or producer.

“At the same time we surrender much of the alternative markets to other dairy producing countries. The processing sector has yet to take advantage of the current opportunities in the UK and in the export market. It has failed to invest in alternative products, be it added value or commodity. The only major investment in the UK in recent years has been in massive liquid plants designed to cut costs to gain UK market share.

“We need to turn that around, have a significantly wider product and processing base than currently exists and we are happy to engage with any processors keen to see what Scottish dairy farmers have to offer.”

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