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Dairy industry turns sour

by Rod Kebble

Jersey cows graze at the Countryside Restoration Trust's Pierrepont Farm in Surrey. They are making milk but are they making money?

Making milk but are they making money? Part of Pierrepont's Jersey herd grazing in Shed Field last Saturday. Cuts in payments to farmers of up to two pence per litre have been announced, with possibly more cuts to follow.



The article Pierrepont’s Bev Clear posted on her Facebook page last week gets straight to the point:

“Have had a price cut of 1.5 pence per litre for our milk and it looks like they want to cut again at the end of the summer. This effectively means we will lose approx. £2000 a month. Other milk companies have made cuts of 2ppl so how many of those will keep going? This is outrageous and will put a lot of people out of business. We are trying to stir up some support for and from dairy farmers. If you drink milk, eat cheese, yogurt, ice cream, cream, crème fraîche to name a few please write to your local MP, help us get the message out there that we are being shafted again, the French kick up a fuss and things get sorted so it is time the British did too! Does anyone know somebody in the media that will get on board if so put them in touch with me, let us create a ‘Save the Dairy Cow’ campaign because if dairy farmers have to give up only their best cows will make it to another farm, the average ones will only make onto the meat wagon!”

The event that incurred Bev’s displeasure was the announcement by Milk Link, the processor to whom all Pierrepont’s milk is sold, that it would be reducing the amount paid to farmers by 1.5 pence per litre from 1st June.

Mike and Bev Clear are at pains to point out that they do not blame Milk Link (it is, after all, 100 per cent owned by farmers like the Clears) but it operates in a competitive market dominated by supermarkets.

While a cut of 1.5 pence per litre might not sound much, when applied to the 900,000-plus litres the Pierrepont herd produces in a year, it equates to £13,500, or £1,125 per month. (The level of production varies from month to month, with the highest being in the summer. In July, for example, the cut in payments will be close to the £2,000 Bev mentions.)

Milk Link says it intends to stabilise the new price through August, which suggests there might be further cuts from September.

The present round of price cuts seems to have begun near the end of April, when milk processor Dairy Crest announced it would be cutting payments to its supplying farmers by two pence per litre, with effect from 1st June (even though it had just increased the cost of a litre to its doorstep customers by one pence from the 1st April).

Robert Wiseman Dairies then followed suit, prompting the resignation of the chairman of the Wiseman Milk Partnership producer group of over 1,000 farmers.

Other milk processors, including Arla Food and First Milk, have also cut payments to producers. Milk Link now pays its farmers 27 pence per litre, while other processors pay between 26.05p and 26.85p. An article in Farmers Weekly on 3rd May quoted Nick Holt-Martyn, sales director of The Dairy Group, as putting the production cost at “about 30p/litre”.

Dairy farmers are at a particular disadvantge due to the perishability of their product. As Mike Clear says, “An arable farmer can stick his wheat in a barn for three months and wait for the price to rise again. This option is not open to the dairy farmer.”

Dairy farmers will not be the only ones to suffer. Feed merchants and equipment distributors will likely feel the pinch as dairy farmers put off non-essential purchases and repair and replacement of machinery.

The Secretary of State for Agriculture and Food, Jim Paice, is himself a farmer but has so far talked about having a “robust” voluntary code of conduct to govern relations between farmers and retailers.

Voluntary codes of conduct have a poor record of success, so perhaps the proposals for an adjudicator, outlined in the recent Queen’s Speech, will be of more help in enforcing the Groceries Supply Code of Practice. However, the adjudicator will not have — at least to begin with — the power to levy fines, so it will likely be a case of seeing whether naming and shaming has any effect. The government has recently agreed to make it possible for farmers to complain anonymously about supermarkets.

Other groups are also involved in finding ways to improve market conditions for dairy farmers. The Fair Trade Federation published a report at the end of 2011, suggesting that its principles might be of benefit to UK dairy farmers, by implementing a “Fair and Local” branding initiative. The report notes that, while the farmgate price of milk fluctuated from 27p down to 18p and then back to 27p between 1997 and 2010, the average retail price of milk increased by over 50 per cent.

Farmers Weekly reported earlier this month that when the major supermarkets were asked to comment on what value they thought there might be in a UK Fairtrade-type scheme, Tesco, Waitrose, Morrisons and Booths (a 28-store chain in the north-east of England) failed to respond.

The Fair Trade Federation also mention that the chairman of the Royal British Association of Dairy Farmers has suggested that farmers be given an extra 4p per litre (though the RBADF website contained no mention of the recent price cuts when I looked at it today), while it was suggested in parliament at the end of 2011 that the price of milk be set at 30 per cent above the cost of production and a “Fair Milk Mark” label introduced. It is not clear what has happened to this idea.

The charity ActionAid has been running a campaign for a supermarket ombudsman since 2007, while Traidcraft recently had a campaigner dressed as a snail hand in a petition to the Department for Business, Innovation and Skills, togther with the suggestion that it be renamed the Department for Being Incredibly Slow.

It looks like it will still be a while yet before any of these approaches come to fruition, while on the other side, the British Retail Consortium is saying that the advent of an adjudicator might lay supermarkets open to malicious complaints.

If you would like to help Bev Clear speed the process up, please write to your MP in support of dairy farmers and copy your email (and any response) to Bev at bevclear@jerseymail.co.uk. Thank you.

Correction 31st May 2012: Dairy Crest increased its doorstep delivery price by 1p per pint/568ml (1.76p per litre) in April, and not by 1p per litre as stated above.