The Welsh rural economy is being short-changed by a massive £220,000 a day because milk buyers are failing to pass back the full value of improved market returns to Welsh milk producers.
That is the message from NFU Cymru at the Welsh Dairy Show in Carmarthen today (Tuesday 25 October).
After an extremely turbulent two years on global commodity markets recent months have seen market returns pick up significantly for dairy products.
But most milk buyers are slow to pass these price rises back to Welsh dairy farmers, many of whom are continuing to produce milk at well below the cost of production.
Aled Jones, NFU Cymru Milk Board Chairman, said: “The most recent AHDB figures for farmgate milk prices show average milk price across the UK at 21.34ppl - in reality, with the scarcity of retailer aligned contracts in Wales, average milk price in Wales will probably be running 1-2ppl below that.
“This is in stark contrast to market indicators that suggest milk price should be moving towards 25-30ppl.
“The latest AHDB market indicators show an actual milk price equivalent (AMPE) of 28.5ppl and milk for cheese value equivalent (MCVE) of 32.4ppl; the latest Global Dairy Trade auction was up 1.9% and spot milk price is now approaching 40ppl, a huge disparity from farmgate price.
“With 2015-2016 average net farm incomes for dairy farmers forecast to have fallen by 47% farmers are in urgent need of price rises being passed back down the dairy supply chain.
'Failure of milk buyers to fully pass prices'
Mr Jones said if the industry takes a conservative estimate of the average Welsh milk producer price lagging at 5ppl behind what it should be, that means the Welsh rural economy is losing out on a massive £220,000 a day, or £6.7 million a month, from a failure of milk buyers to fully pass price increases to Welsh dairy producers.
“This money is vital not just for farmers, but to the agricultural merchants, vet practices, machinery dealers, builders, electricians, plumbers, accountants and others who rely on dairy farmers for a significant part of their income and who, as a result of cash flow problems on dairy farmers, have also suffered through this dairy downturn.
“Farmers have understood the difficulties there has been in the marketplace for the last two years and accept that the collapse in commodity prices put pressure on the whole supply chain, but what we cannot accept is the widening of the gap between farmgate prices and market returns.
“Welsh dairy farmers’ patience is running thin - many have racked up huge debts during this difficult period and are struggling with the pressure of repayments. We rightly expect the current round of milk price announcements to see substantial price rises across the board to reflect the upturn in market conditions, to help reverse the decline in farm income and to bring much needed cash into the Welsh rural economy,” Mr Jones concluded.
