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Milk price cut pain for dairy farmers
THE year of 2009 is already proving to be an unhappy one for dairy farmers following the news that two of the largest milk processors in the country are cutting their prices.
Yorkshire-based Arla has cut its milk price to farmers by two pence per litre and First Milk by 1.25 pence per litre, with both citing the economic downturn as the reason for the cuts.
The move has been condemned by the National Farmers' Union and by industry body Dairy UK, whose director general Jim Begg said the cuts came at a time in which there were serious concerns about the impact the coming months will have on dairy farmers.
However Mr Begg added that the bad times would not last forever and said that Britain remained one of the most competitive markets to produce milk.
Both of the producers made their announcements this week via trading updates.
First Milk's chief executive Peter Humphreys said conditions in the global dairy markets which drove UK milk prices upwards in 2007 and 2008, have now deteriorated markedly. Hanne Sndergaard, deputy chief executive of Arla Foods , with responsibility for milk procurement said the company was passing on the cut with "regret".
However Gwyn Jones, the NFU's dairy board chairman, said it was hard to see the justification for any price cuts in liquid milk.
"I'm not blind to what's happening on world and EU commodity markets and am well aware of the pressure being exerted on the cheese market by lower priced, lower quality imports, but for a large liquid milk processor such as Arla to drop its price so ruthlessly and then blame it on falling commodity prices is very surprising.
"Processors, like farmers, are feeling the pinch and are having their margins squeezed, but with oil, fuel and energy prices falling at the factory, processors should have more than enough room to cope with the cuts required without turning to farmers to bale them out.
"It's difficult to talk of partnership in the supply chain when companies act like this, exploiting the poor, one-sided contract with farmers. The British dairy industry desperately needs a period of long term stability if it is to regain its confidence and meet the growing demand for British milk and dairy products."
Mr Begg said: ""We know that dairy farmers are experiencing very tough conditions, with historically high prices still for many inputs and pressure on returns. Milk processors are also facing a difficult market. They are caught between calls for high milk prices and a drive for lower consumer prices, and they are responding by rationalising and cutting costs.
"But Dairy UK believes businesses in the dairy sector can draw comfort from the longer term view. Dairy demand growth is still outstripping production growth in the developing world. Here in the UK and Western Europe, our consumers remain loyal and retain their appetite for new and innovative dairy products. As retailers must recognise, there is still strong demand for British dairy products made with high quality British milk."
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Saturday 26 May 2012
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