Market indicators show dairy farmers are being short-changed to the tune of £200 million pounds, the NFU said today.
The farming union is calling for milk buyers to recognise the strength of current markets and start paying fair, sustainable prices to their milk suppliers.
After two years of turmoil in the dairy sector, during which time milk prices for many farmers have been, and continue to be, below the cost of production, commodity markets have now quickly turned.
Evidence shows market signals are pointing skywards with spot prices for milk now approaching 40ppl and quotes for next month hitting 50ppl.
But speaking on the eve of The Dairy Show on Wednesday (October 5), NFU dairy board chairman Michael Oakes said that milk buyers are lagging behind in passing on the huge lifts in market prices to their suppliers.
"Since May this year market indicators have started to show a massive differential between what prices dairy farmers should have got compared to what they actually did get – between June and September this adds up to around £200 million," said Mr Oakes.
Dairy analyst Chris Walkland has being doing the sums – they show that back in August AHDB’s AMPE and MCVE indicators were 26ppl and 28ppl respectively while future price indicators continue to be positive.
Even today most non-aligned prices are still at or below 20ppl with the August Defra average milk price, which included aligned prices only reaching 21.34ppl.
'Milk buyers should be concerned'
"Clearly milk buyers should be concerned as to where their future milk supply will come from," said Mr Oakes.
"That’s why recently we’ve seen Dale Farm Northern Ireland encourage more milk supply for the next three months.
"Any extra litres supplied to the co-operative will receive an extra 4ppl on top of a 2ppl winter premium.
"Farmers have been patient, understanding the time lag that is part of dairy trade.
"But that reason is starting to wear thin, as we need to start considering increased costs of winter housing and feeding.
"Our message is clear – until milk buyers start backing British dairy farmers and start paying fair, sustainable milk prices, volumes will not recover.
"Dairy farmers want to produce milk and the only way milk buyers can pull the dairy sector out of this nose dive is to quickly pay them a profitable price for their milk," Mr Oakes concluded.
Milk processors are 'sitting on stocks'
The Rural Payments Agency has indicated that 1800 UK farmers are looking to reduce production by 112 million litres this autumn.
NFU Scotland’s Milk Committee Chairman Graeme Kilpatrick said there is "every justification" – based on commodity prices, production levels and futures prices – "for every dairy farmer to be getting 25p per litre now – and not in three or four months’ time."
"The price increases announced in recent weeks are welcome but they neither go far enough or fast enough in our opinion and leave almost all producers woefully short of a profitable milk price," Mr Kilpatrick said.
“All dairy farmers are acutely aware of where commodity prices for cheese, butter, cream and powder have shifted to in a matter of a few weeks.
"The unacceptable delays seen in milk buyers passing the benefits of the price lifts back to their suppliers is creating huge concern and frustration at farmer level.
"Some of those milk processors will be sitting on stocks of cheese, butter or powder, made with incredibly cheap milk, and are now set to make a windfall on them based on rapidly increasing market prices.
"Farmers cannot be left behind to continue producing at a loss," Mr Kilpatrick concluded.
