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Supermarkets remain real villains

By Western Morning News  |  Posted: August 08, 2012

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What I find most extraordinary about the shenanigans in the milk market is that the Dairy Coalition is claiming any sort of victory in staving off the next proposed price cut.

That the processors have been publicly shamed into dropping their proposals is an encouraging sign that they don't like their piratical tactics being exposed to general view. But the fact remains they are still paying thousands of farmers less than they need to continue trading in the black.

And behind them, of course, are the supermarkets, the real villains in the piece who are using our marvellous product as a loss leader merely to increase footfall – which just shows how little they actually value milk.

As for the red herring of European cream prices dropping, this is exactly the excuse that was being trotted out a decade ago, again to justify reducing the milk price. Do the processors think we don't have memories?

When you consider that half the liquid milk produced in this country is sold as skimmed or semi-skimmed and they even gain cream from a lot of the milk sold as whole cream. If the processors are too lazy to market cream properly or have not go the wit to divert the surplus into butter-making and eke out supplies more slowly, that is hardly the farmers' fault.

When I was on the NFU South West milk committee, it unanimously agreed the dairy industry desperately needed a business plan, one which should include synergies on transport; pulling together the co-ops, Dairy Crest and Wisemans; and above all branding British milk to obtain a better price.

This proposal was sent to the national milk committee – where it was duly buried, while former dairy board chairman Gwyn Jones went on wasting years fiddling around with model contracts.

Since Farmers For Action started protesting, the NFU has had a decade to deliver more power to the dairy farmers of the UK. But any chance of that happening now has disappeared.

We have seen Milk Link go to Arla, which uses this country as a profit centre and whose massive new plant at Aylesbury will destabilise the liquid market more. We have seen Wiseman sell out to Muller, another European dairy company.

If you have seen how Muller has treated the Polish farmers, you will conclude that it won't be a good friend to the British dairy farmers. The Polish government has had to bring in legislation to curb its activities.

On top of this we have seen millions wasted as companies have gone bust and dairy farmers have been taken for a ride – perhaps the names of Cricket St Thomas, Westbury and Dairy Farmers of Great Britain will ring a few bells.

There is only one way out of this: Jim Paice should be putting on the pressure to bring in primary legislation to make it illegal to sell below the cost of production.

But what is the cost of production? It is definitely not 30p per litre.

A year ago I commissioned my accountants, Oakleys, to calculate exactly the true cost of production, taking into account the capital invested and labour employed, as with any normal business, and as I classify dairy farming as a high-risk business, you have to look at 20 per cent. The figure they arrived at was 36.2p and this was calculated across 142 dairy farms, with an average herd size of 170 and the biggest a herd of 1,800. To back this up further Old Mill's Mike Butler a year later has come up with a figure of 37p to 38p.

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