Milk Price Cuts, Contract Changes Hurt Producers

SCOTLAND, UK - National Farmers' Union (NFU) Scotland believes the savage milk price cuts and contractual changes imposed on Scottish dairy farmers in recent days is a stark reminder to politicians of the urgent need to secure a robust code of practice for the dairy sector.
calendar icon 4 May 2012
clock icon 2 minute read

Milk processor, Dairy Crest, led recent price cuts in the milk sector last week. It imposed a 2p per litre cut on almost 600 of its dairy farmer suppliers at 4 days notice. That was followed by the disappointing announcement this week, that Scottish-based milk processor Robert Wiseman Dairies was to impose a similar cut on many of its farmer suppliers from June, blaming weak cream prices.

NFU Scotland is also aware that the Fresh Milk Company, the procurement arm of Lactalis McLelland (parent company of the Stranraer-based Caledonian Cheese) has also changed its milk pricing arrangements at short notice, going back on a previous agreement with its direct suppliers.

NFU Scotland Vice President Allan Bowie said: "The clear and ongoing imbalance of power within the dairy supply chain is clearly working against a sustainable dairy sector – not just in Scotland but across much of the UK. The ability of processors to impose severe price cuts or changes to contractual agreements with little negotiation and with impunity is an unacceptable situation.

“The UK dairy sector, due to a combination of the power of retailers and processors and the lack of significant export options, has consistently left producers vulnerable and exposed as the weakest link in the chain. There is cause for long-term optimism in dairy – as seen in DairyCo’s most recent intentions survey out today (Wednesday, 2 May) – but such swingeing changes to price and terms will have a serious impact on the confidence and resilience of dairy farmers short-term.

“It is clear that some processors are viewing weaker dairy commodity prices as an opportunity to impose cuts on their farmer suppliers. This simply confirms the long held belief of producers that milk prices in the UK are slow to respond to booming world prices but quick to fall at the earliest sign of weakness. Dairy producers have enjoyed only part of the benefit of the recent strong dairy markets world wide, with UK reacting much more slowly and to lower levels than our EU and global competitors and yet prices are now dropping very quickly.

“Longer term, the dairy sector has real potential to be vibrant and profitable for all parts of the chain. However, if we do not resolve the current damaging and divisive supply chain issues then the opportunity of benefiting from the predicted global opportunities in dairy will be lost to others.

“The short term may be difficult for dairy producers, but we must resolve the fundamental issues for the long term or our whole dairy industry will suffer the consequences.”

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