4 May 2011

4 minute read

Europe

The Union believes that if a market-related pricing formula were incorporated as a baseline into producer contracts, it would break the cycle of market failure in the dairy supply chain. Such a move could allow dairy farmers, irrespective of whom they sell their milk to; to move forward with improved confidence and greater certainty. It would also deliver sustainability, which is in the best interest of whole supply chain.

The Union proposal is part of a wider package of milk measures including moves in Europe to strengthen the position of dairy farmers and the need for a supermarket adjudicator here in the UK to help police supply chains.

The opening roadshow was held in Dumfries on Tuesday, 3 May and meetings followed in Stranraer on 3 May, Ayr (4 May), Lanark (5 May), Thainstone (5 May), Kinross (6 May), Campbeltown (12 May) and Isle of Bute (12 May).

NFU Scotland Vice President Allan Bowie said: “This is a proposal produced by dairy farmers for fellow dairy farmers and from the outset it has been driven by producers representing every major supply relationship in Scotland.

“For all those milking cows, the number one issue remains price. Over months of discussions, those dairy farmers involved clearly identified that incorporating a transparent pricing mechanism into contracts has the potential to move the whole dairy supply chain – producers, processors, retailers and consumers – onto a fairer and more sustainable future.

“In a bid to find a permanent solution to the problems that have plagued the milk sector for years, dairy farmers have turned out in huge numbers today to hear about the proposal and what it might mean for them. While we appreciate delivery will be difficult; there was overwhelming support from farmers in the audience to drive forward with our proposal, not least because the figures make positive reading for an industry that has been short on good news.

“Based on existing market indicators for commodities such as milk powder, butter and mild cheese, the proposed formula – if in place today - would deliver a basic milk price of 32p per litre. That is substantially higher than current average price for milk here in the UK and on a par with the prices being paid to dairy farmers in other European countries.

“Discussing such a proposal now is timely and could see milk contracts in the UK providing a model for elsewhere. The High Level Group in Europe, charged with looking at the milk sector, has recommended that steps be taken to strengthen contracts and improve the negotiation position of producers. Our latest work fits with that recommendation and also dovetails with the model contract developed a few years ago by NFU and NFUS giving a genuine opportunity to develop a meaningful contract with real teeth.”

Castle Douglas dairy farmer, Kenneth Campbell, chair of the NFUS Milk Committee added: “The formula we are proposing would ensure that producers received a price that more truly reflected the real market value of milk and move producers in the UK away from the bottom of the European price league to a more level playing field with our European counterparts.

“There are worries that linking our milk price closer to commodity prices may expose us to greater levels of volatility. That may be true, but if the formula had been in place over the last decade then milk prices in the UK would have been consistently higher than the average price actually paid. If that is what volatility looks like, then let’s have the debate.”

Speaking in Dumfries, NFU Scotland Chief Executive James Withers added: “This formula proposal presents an opportunity to break out of a cycle that’s dogged the dairy sector for more than a decade. Dairy farmers are at a crossroads and need to decide which way they want to go. If they had told us at our roadshow meetings that they were happy with status quo, then fine. However, today’s showing is a clear signal that they are unhappy, and that the price formula is a possible vehicle for change.

“The Union is creating the right environment for discussion on price formulas, but producers need to push them and speak to their buyers and their producers representatives. At the same time, we are speaking to processors, co-ops, and retailers. This is about creating a new foundation for the industry that can deliver sustainability throughout the dairy supply chain.”

TheCattleSite News Desk