Wayne Martindale: Counting the cost of dairy price collapse

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“WHAT’S the price of a pint of milk?” used to be a question posed by reporters to stump the rich and powerful. But now, with the crisis in farming today, everybody is talking about the price of milk, which has dropped to around 25p a pint.

This seems unsustainable and illustrates the complexities of modern food supply chains. For while we cannot be asked to pay more for food when food poverty is a real issue in our society, at the same time we can’t let world-class businesses fail because of unfair pricing. Consumers should be aware of who is calling for the increase in whole milk prices and, if there is unfairness in the supply chain, we must do our best to put that right.

In the current crisis, farms who are processing and delivering milk to customers have been most vocal and I believe they are most likely to directly benefit from any consumer price increases – without the industry obtaining those same benefits. 

This exposes what I believe is the most important issue and it is one that MP Anne Mcintosh raised last week with what she called “the indirect supply chain”, the voice of small suppliers who sell to processors.

The negotiating power of the smaller business is the issue which has sparked the current crisis because of the failure of the company First Milk to make prompt payments following the Christmas period. In reality, farmer-owned co-operatives are notoriously risky. Heritage is crucial here and relationships are often built on trust and fairness over many years. 

The current crisis has no doubt damaged relationships, but it has also raised the issue of fairness. The heritage of our region is on our side as milk from the North of England is enshrined in the myth of the “milk train” to London every morning. First Milk itself has deferred payments to reinforce its business financially. Seasonal risk is a reality of the business and support during this crisis is not an long-term answer for indirect supply chain issues. 

All of this has prompted the Prime Minister to ask the Grocery Adjudicator to investigate and it will hopefully result in all dairy producers being part of negotiations on price with processors, whatever the size of their herd and production capacity. 

Smaller farms often have a limited voice in these types of negotiations and it is not as if we are dealing with an inefficient industry, with British farms being top-ranked globally, producing nearly 14 billion litres of milk each year with some of the best animal welfare standards in place on all farms by law. The adjudicator must provide a mechanism for fair pricing for all producers.

Local value is often put to us by producers who suggest we should only buy milk from where we live and ignore the areas of the country such as Cheshire, Cumbria and Somerset where milk is produced very efficiently. I strongly believe that this approach is not reflective of the modern food supply chain and it is not a solution for the industry – it only helps a few. 

Pride in locality is important, but as I put forward in my book Global Food Security and Supply, we depend on a global supply chain for diversity of food choice. In reality, most of us will be eating locally because most of what we eat comes from the UK and closer European neighbours. Indeed, I led the Project Flow at Sheffield Hallam where 80 Yorkshire and Humber food manufacturing firms were studied, and around 80 per cent of all their food products stayed in the region. This study included several well-known Yorkshire cheeses and ice cream brands we are very proud of. We eat locally and we like it – but we must have the opportunity to choose.

The move to engage the Adjudicator is welcomed but let’s not forget that milk is an ingredient for a highly diverse range of foods including creams, butters, and cheeses where it takes eight litres of milk to produce a kilo of cheddar. The UK produces nearly half a million tonnes of cheese and butter each year.

The dairy supply chain is going through a transition that reflects consumer trends and the need for producers to seek greater added value in dairy products. We have seen the emergence of enterprising farm-based producers but this opportunity will have a limit to growth because it is locally focused and ultimately we need to seek a fairer national supply chain. 

After all, milk may not be the product of greatest value but it is one ingredient the UK food industry and consumers cannot live without. We have some of the best producers and we provide a great consumer experience, but we all need to be aware of the value of milk from British farms. British milk production should be something we are all proud of.

• Wayne Martindale is a senior research fellow at Sheffield Hallam University and the author of Global Food Security and Supply, out now.