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Dairy costs increasing at alarming rate as union leaders meet



14 November 2012 11:44:46|Dairy,Finance,News,Shows and Events,Supermarkets

Dairy costs 'increasing at alarming rate' as union leaders meet


Representatives of UK farming groups met in Cardiff this week to discuss the future of the dairy industry.
During the two-day meet, representatives from the unions discussed the UK and global market opportunities for the industry that is facing spiraling production costs.
The representatives at the meeting, including members from the NFU and the Ulster Farmers' Union, agreed to continue dialogue with milk buyers and made a commitment to press for the Voluntary Code of Best Practice for Dairy Contracts in Great Britain, and the separate Code agreed in Northern Ireland, to be delivered in the form of real improvements to farmers' contracts.

NFU Cymru milk board chairman Aled Jones, who set the scene for discussions, said: “Dairy farming is at the heart of the Welsh rural economy, contributing 30 per cent of Welsh agricultural output."
“Of the 1.5billion litres of milk produced in Wales, 870 million litres is processed here by more than 40 dairy processors and 90 per cent of this processing capacity is into cheese. It is vital that our processors concentrate on adding value to milk and that this value is passed back to farmers to invest in the foundation of this great supply chain.

“We’ve seen the benefits of collaborating through the dairy coalition, now we must work to ensure individual farmers explore ways to collaborate so that the potential of our industry and market is unlocked.”

Rob Harrison, NFU dairy board vice chairman, said: “It is clear to me that now is the time for dairy farmers to capitalise on market opportunities. Supplies are tight, demand is high. With the Voluntary Code of Best Practice for Dairy Contracts being implemented farmers should expect the market to deliver on a sustainable price for their milk; one that they so desperately need.”

Gary Mitchell, NFU Scotland dairy committee chairman, said: “Now is the time for farmers to collaborate and pull together. Collaboration can take many forms, from working with producer representatives, exploring the opportunities of membership of a producer organisation or joining a co-op. The bottom line is that there is strength in numbers and now is the time to work together to optimise returns from the market.”

Ulster Farmers’ Union dairy committee vice chairman Jonathan Moore added: “While our routes to market may differ, the fundamentals are the same. Our milk is in demand and it must be valued accordingly if farmers are to have the confidence to invest in their businesses. Costs are increasing at an alarming rate and farmers cannot absorb them.”
The NFU told a House of Commons Committee last week that the dairy 'turmoil' of 2012 must not be repeated as part of its inquiry into the future of the industry.
The delegation included Deputy President Stephen James and Milk Board Chairman Aled Jones.
"The events of this summer have to be a turning point" said James.
"The decision of processors to slash milk prices attracted a huge amount of interest and led to headline news – in fact it was only pushed off the front pages by the Olympic Games."
"Whilst these price cuts have been withdrawn, the long-term sustainability of the industry remains uncertain."
Dairy farmers are likely to face worrying tax bills this winter, despite many producing milk at a loss following well-publicised price reductions by processors.
Although cash flow and profits are already tight – and likely to be even tighter over the winter months - farmers stand to incur hefty tax charges in January, following comparatively good milk prices in the 2011/12 financial year.
"While profits may not have been at levels farmers would have liked, accounts being produced for that year indicate that the income for 2012 rose compared with the previous year" said Mike Butler, senior partner at accountancy firm Old Mill.
"Where profits rise, tax liabilities rise also."
NFU Deputy President Stephen James said the dairy sector 'has been a source of tension' in the last decade.
"The key problem over many years is that dairy farmers have routinely failed to see prices rise as fast and as high as the dairy commodity markets."
"Yet, when these same markets fall, the milk price paid to farmers drops like a stone. This is a clear result of the exploitative nature of milk contracts and lack of negotiating power that currently exists."

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