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The price of milk – does everyone win but the farmer?

Milk splashing

TV, radio and social media have been alive with the sound of dairy farmers battling to earn a fair milk price. The National Farmers Union’s Tom Hind puts forward their case and explains how the fight for milk affects you.

The current #sosdairy campaign has put dairy farming right in the public spotlight, with dairy farmers and their supporters demonstrating outside supermarkets, processing factories and dairy distribution depots over the price of milk.

It’s taken hold of the Twittersphere and drawn public condemnation at the practices of supermarkets and dairies to the detriment of dairy farmers. And ultimately, consumers are at the heart of everything the dairy industry does.

Have you got milk?

The response from the general public to the recent milk price crisis has been phenomenal with many hundreds of people joining farmers at protests or writing to supermarkets and dairies asking what they are doing to look after dairy farmers. And celebrities including Hugh Fearnley-Whittingstall and Jamie Oliver have thrown their weight behind the campaign too.

Milk is iconic. Almost all of us buy at least a pint of milk once a week. Because of that, it’s also highly competitive, with supermarkets waging war on milk prices to ensure we perceive them as offering a better deal than their rivals. The contracts to supply supermarkets are vast and the main dairy companies compete aggressively to maintain and gain milk volume in order to grow their businesses and make a profit.

No-one can afford to take milk for granted. It’s a fresh product that can’t readily be imported. It has to be produced all the year round and to strict hygiene and animal welfare standards. The sums that need to be invested to ensure a dairy farm can maintain high standards and be efficient are significant.

What’s more, cows need to be fed a healthy, and sometimes specialised, diet and most dairy farmers are facing the effects of rising feed costs because of droughts in major grain producing parts of the world. So the price cuts that some dairies recently announced are seen by many farmers as the proverbial straw to break the camel’s back.

Supermarkets promise to pay more for milk

Some supermarkets have been doing the right thing by agreeing to pay prices that reflect production costs to the dairy farmers who supply them. Marks & Spencer, Waitrose, Tesco and Sainsbury’s all have these arrangements in place for liquid milk. In recent days, the Co-operative, Morrisons and Asda have made similar commitments.

But there’s more to do to get a fair pricing model for cheese, yoghurt and other dairy products.

The problems don’t just lie at the door of supermarkets either. Another major problem is the way that dairies buy milk from farmers. For dairy, every farmer has a contract to supply milk. Nearly all of those require farmers to sell exclusively to that processor for a minimum of 12 months. Yet the dairy processor retains absolute discretion and power in setting that milk price, and they can change these prices at will and with no notice. Does that sound fair to you?

That’s why the government’s been helping to broker agreement on a code of practice for dairy contracts to eliminate bad practises and promote good ones. At the NFU, we think this is a step in the right direction to help create a long-term framework for dairy farmers, but it doesn’t help the short-term payment problem.

The future for British dairy farmers is still bright. Now they, together with dairy companies and retailers, all have to work together. We can have more high-quality produce, more diverse and affordable milk and dairy products that excite you, the consumer.

This is the long-term strategy that we think will help ensure our dairy industry is a bit less dependent and vulnerable in such a competitive and volatile market place. And it will help to really deliver what consumers want; great British milk.

Do you think farmers should have more control over the price for milk so that they can get a fairer price? And do you think it’s right that a bottle of water is more expensive than milk?

Which? Conversation provides guest spots to external contributors. This is from Tom Hind, Director of Corporate Affairs at the National Farmers Union – all opinions expressed here are their own, not necessarily those of Which?

Comments
Profile photo of richard
Member

There is no doubt the Farmer loses out – Generally they are small companies that are oppressed by the large dairy companies to keep the price below the economic price – The only reason the dairy companies get away with it is because the Tories support greed – punish the poor – The only reason the Tories are “reacting” is because the Farmers are in general richer Tory Voters. If they were not the Tories would be putting out that farmers are greedy self serving self centred left wing activists. The truth doesn’t matter – it is PR that matters – Which is why the ConDems are heading for a disaster,

Member
Phil says:
26 July 2012

Private Eye have been covering this issue for years during which time thousands of dairy farms have closed. It’s sad that it’s needed direct action to bring the matter into the wider media.

Member
Vinnie says:
26 July 2012

Why not farmers setup & run their own cooperative dairies across the country and teach lesson to dairies? It will provide them full control on their own matter. They can set their own price.

Member
Phil says:
26 July 2012

There is one, First Milk, but like it’s predecessor that folded in 2009 it’s not big enough to have any effect on prices.

Profile photo of Anna Norman
Member

I think supermarkets have far too much power when it comes to pricing. Their uncontrolled market dominance allows them to hugely exploit all farmers, not just dairy farmers. Surely lots of people would be happy to pay a little bit more for milk to avoid us having to import it from abroad once our own industry collapses? I agree with the Archbishop of Wales on his comments about fairtrade beginning at home. We definitely shouldn’t take milk for granted! It’s currently around half the price of coca-cola – which doesn’t seem fair at all when you compare how each are produced.

Profile photo of pauliboo
Member

I think the government should set a minimum price that the supermarkets have to pay the farmer.
I’d be happy to pay more for the produce I buy, especially milk if it was sourced from Britain and even better locally.

Member
Phil says:
26 July 2012

Like the old Milk Marketing Board used to do? This was abolished in 1994 allegedly because it contravened EU competition rules. I think government intervention to set prices would do so too.

Profile photo of pauliboo
Member

Congratulations Lidl, now let’s see more supermarkets following suit. http://www.express.co.uk/posts/view/335076/Now-Lidl-helps-out-struggling-dairy-farmers/

Profile photo of wightweb
Member

I think that the 2p extra by Lidl and Co-op from 1/8/12 is not enough considering there was an additional price reduction just a short while ago, this 2p support is just not enough!

Profile photo of w j g
Member

Do you think farmers should have more control over the price for milk so that they can get a fairer price? And do you think it’s right that a bottle of water is more expensive than milk?

Its interesting that you should mention milk and water..theses are 2 necessities of life and could both be in short suppy in years to come..Of course milk is dependent on water as most products are..Worldwide there is big demand for both theses products. In China there is high demand for imported powdered baby milk ..This drives up the price internationally..
Should farmers have more control over the price of milk? ..Yes they should…But as in most seller buyer situations …its the buyer that sets the price..
Why is a botle of water more expensive than milk? Short answer …marketing.
Marketing a product that is seen as being pure (which its not) is part of our modern healthy lifestyle and packaged in one universal standard of measures, metric measures that almosr all of us understand.

Profile photo of wightweb
Member

It is a bit much when the CO-OP is a bigger villain than Tesco. They keep talking about Robert Wiseman diaries but they should be saying that Muller own the diary from earlier this year, is there something in that, I wonder? The CO-OP the last time I looked was giving another 2p but the reduction in payment recently to the farmers after 1/8/12 will be more like 4p by Muller the CO-OP’s supplier, will this still leave Tesco’s paying more I wonder. I would like to see more of the detail in the news as to a break down of all the interested parties and verdict from someone from one of the universities that has the respective knowledge.

Profile photo of wightweb
Member

I have just read that Muller are not to proceed with the 1/8/12 cut of 1.7p but the reduction made in June is still in place. The main supermarkets have now agreed to pay cost of production but I think that will only be for the most efficient/largest farmers, and cost of production does not mean you get a profit to live on! Last week the farmers were talking about the need for about 5p to stay in business. I think their plight will fade into the news background and more will go bust. With the abolition of EU milk quotas by 2015 I think most of our milk will come from abroad by then. I remember when quotas started the UK got less than it consumed and Holland got more than it consumed, I wonder how that was calculated??

Profile photo of lessismore
Member

So we have the main dairies competing aggressively and the supermarkets competing aggressively and selling as a loss leader as fresh milk is a staple in the British diet…

When is a cartel not a cartel?

Profile photo of dyfnwal
Member

Since 1994, neither of the main political parties have sought to replace the Milk Marketing Board (1933 – 1994), which was abolished by the UK Government (acting on EU rules). Less than 1% of the UK population is engaged in Agriculture (only some are dairy farmers). Their ability to sway votes in parliamentary seats is negligible, leading politicians to effectively ignore them.
Contrast this with French farmers where a far higher proportion of their population is engaged in Agriculture, and a politician’s career can be destroyed easily by farmers voting against him.

All of our dairy farmers are currently walking down a road that leads to diversification (if you’re lucky), farm closures (much more likely), or bankruptcies.
The situation for tenant farmers is even worse (as they have far fewer assets).

The British countryside will be shortly be denuded of the smaller family farms in favour of large industrial units probably to be owned by the dairies/supermarkets.
In the short to medium term, we will probably see a milk shortage, and a countryside with fewer people living and working on it.
The few dairy companies/supermarkets that dominate the market seem to have effectively formed an oligopoly (not free market) which allows them, not market forces to dictate terms to farmers.
Many farmers have faced working (or being on call) 24/7 for 365 days a year often in bitter cold & wet weather.
In a capital intensive industry, farmers may appear to be wealthy, but money is tied up in land, machinery, and animals.
Would you say that your Aunty was rich because she had a mortgaged suburban house in Surrey worth £400,000.00 – of course not, particularly if she had to live off only a state pension.
The notion that “farmers are in general richer Tory Voters” is indicative of the gulf that has widened between the urban and the rapidly diminishing rural population.
We must forge new links across this divide, so that we may all understand the need for a viable and sustainable future for food production by farmers.
It may well be that UK farmers must go the way of the European farmers in creating Co-ops to market their produce.
Unfortunately, our politicians have yet to understand or properly support farmers in this area.

The memory of wartime Britain’s food shortages are now too far distant.
We are seeing worldwide floods and droughts destroying crops on an increasing scale. The new found wealth of the rapidly industrialising BRIC countries (population 1800 million) will lead to a surge in demand for meat, which will vastly inflate the demand for crops.
A world food shortage is inevitable.
As Britain has not been able to feed itself for ~100 years, we must now prepare for the Biblical “seven lean years”, by maximising the sustainable production of food (including milk) for the long term future.