What price milk? Supermarkets and milk processors are being subsidised by small dairy farmers

17 July 2012 - 8:03pm -- Gerry Danby
National Farmers Union

Last Wednesday, 11 July 2012, at very short notice, around 3,000 dairy farmers descended on Westminster. The memory will, I am sure, stay with thousands for years to come. Sadly this was not a cause for celebration, it marked a low point for increasingly desperate farmers struggling to get a fair price for a pint of milk, a shopping basket basic we all take for granted. The campaign surrounding the Westminster Milk Summit went well and, from late morning on the day, #sosdairy took the top trending slot on Twitter and held it consistently for the rest of the day.

Over the last 40 years 90% of dairy farms have gone out of business. 20,000 dairy farms have disappeared over last 16 years and there are now only 14,500 left with another selling off its herd and closing almost every day.

The milk industry today is dominated by a few large supermarkets and industrial scale milk processors, the traditional dairy farm sits at the bottom to be squeezed and exploited. Retailers use milk as a means of driving footfall while milk processors undercut each other to gain market share and pass these cuts to farmers. The result is an absurd situation in which milk costs less than bottled water.

The worst culprits are Robert Wiseman, Arla, Dairy Crest, First Milk and Milk Link, which by 1 August and over last 3 months will have slashed the price paid to farmers by up to 3.7 p per litre, well below the cost of production. Wiseman blames falling cream prices, but these have actually risen in recent months. Whilst Tesco, Sainsburys, M&S and Waitrose, in particular, have been held up as the good guys in this crisis, they pay the cost of production, this only makes them less worse, not good.

The price paid to dairy farmers over last 10 years has never been that great, but costs have risen and the recent cuts simply pile on the pressure. Over the same period supermarket profits on milk rose from 2.5p to 9.3p per litre and the stark reality is that dairy farmers are subsidising supermarkets and milk processors. It is surely simply a coincidence that the Milk Marketing Board was dissolved in 2002?

Gross liquid milk margins

Farmers are tied into contracts which allow milk processors to cut the price below the cost of production at will and sometimes even retrospectively. The farmer has no right to terminate the contract, a fact which in itself clearly demonstrates these are not contracts negotiated by parties on an equal footing.

Public ignorance about the treatment of dairy farmers is all too apparent and illustrated in video interviews conducted by Farmers Weekly. The public are, however, clearly sympathetic, do not like the idea of dairy farmers getting such a raw deal and often show a willingness to pay more, but this would simply let dairy processors and the supermarkets off the hook.

The National Farmers Union, which represents diverse farming interests, was slow to show the leadership needed. It reacted to the crisis in providing a means, the Westminster Milk Summit, by which dairy farmers could vent their fury, but only more recently has it shown signs of organising and leading a campaign.

A better price for dairy farmers would be a start, it would provide a breathing space, but it is not a sustainable long term solution. So much of our food system needs a fresh approach and new ways of working, ways which will ensure the value of food like milk is reflected in the respect and reward we give to the farmers who produce it.

The NFU is encouraging the formation of producer organisations which, under the EU Dairy Package, would bring farmers together to form producer organisations which individually or collectively could account for 33% of the UK dairy market. This would be a big step forward in creating a level negotiating playing field between farmer and processor, but it would fall well short of a solution. We remain in need of pioneering dairy farmers willing to try and adopt new business models.

Meanwhile, we must stand by, be proud of our dairy farmers and support them in every way possible. Next time, let’s look forward to a Milk Summit where thousands of dairy farmers come together to meet in celebration!


MP Letter Writing, NFU Guidance and Notes 6 July 2012

Milk Prices, RUSource, the rural information network, Briefing 1551

A fair price for a farmer’s milk, The Telegraph, 16 July 2012

British farmers' milk price protest, The Guardian, 11 July 2012

Why milk has gone sour: Tasteless, stripped of nutrients and churned out by 'battery cows' who never see a blade of grass, MailOnline, 12 July 2012

Are farmers losing out on a pint of milk? fullfact.org, 12 July 2012

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