09-06-2014 06:26 AM | Dairy, Finance, News

Pricing models need to be developed for dairy sector, says NFU



Pricing models need to be developed for dairy sector, says NFU
Milk buyers are being called on to develop pricing models and a strategic partnership with their suppliers.

This is after recent announcements by various dairy co-operatives of price cuts, including First Milk, Arla and Grahams Family Dairy, and has prompted a greater need for more effective, intelligent and profound pricing.

The Union has previously highlighted the need for a transparent and market-related pricing mechanisms in the wider milk sector. Progressive milk buyers must not base their supply security on paying just as much as they need to, based on a competitor’s price.

NFU Scotland’s Dairy Policy Manager George Jamieson said: “The latest round of cuts have been justified by globally weaker markets and has followed the usual pattern that once one card falls the rest follow.

“For those processors who claim that the price was as high as could be delivered then compare prices for March 2014 in Denmark 38.15ppl, Sweden 36.95ppl and Holland 36.37ppl with the UK average price of 33.65ppl. These countries are dominated by successful co-ops, who have an obligation to pay their owners [farmers] as high a price as they can deliver. Thus their price depends on the success of the business which will be dictated by markets and performance. If both go well then farmers benefit.

“Most UK private companies pay a competitive UK price, but how many pay a price based on the success of the business, rather than just maintain alignment with competitors. The prize for progressive dairy companies who genuinely value farmers as partners is long term supply security.

“The voluntary Code of Practice is the vehicle for processors and farmers to define best practice. We need the dairy supply chain to take this Code seriously and constructively as it holds no fear for those who follow best practice. We can argue about compliance, but we must also see engagement from those who are afraid to be held to account.”

First Milk chairman Sir Jim Paice MP said: "Unfortunately the downward trend within dairy commodity markets has continued, albeit the rate of fall has thankfully slackened in recent weeks.

“While the peak of our domestic spring flush has passed, the global dairy market remains uncertain and we continue to watch it carefully."

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