'Little confidence': Supply chain 'must deliver fairer returns' for dairy farmers

Further milk price cuts have been reported as commodities weaken
Further milk price cuts have been reported as commodities weaken

The supply chain must deliver fairer returns to milk producers as further price cuts are announced, a farming union has demanded.

Milk price analysis shows that UK dairy farmers are lagging significantly behind when compared to the returns being enjoyed by many EU and New Zealand producers.

Farmer-owned First Milk has, this week, announced a 1p per litre price cut having held prices last month.

This coincides with the decision by dairy giant Muller, who slashed its price to farmers by a hefty 1.5p per litre for January, sparking fury in its producers.

Arla’s price for its farmers reduced by 1.3p per litre, taking it to 31ppl pence from 1 January.

And Meadow Foods also decreased its milk price by 1.25 pence per litre to 29.75ppl from 1 January.

NFU Scotland Vice President Gary Mitchell said First Milk’s February price cut is "another negative consequence" of the weakening milk commodity prices.

He said the global nature of the dairy sector means "no one is immune" from high volatility, low margins and uncertainty, which he said impacts on confidence to invest and innovate.

“While NFU Scotland acknowledges the pressures of the competitive market, we make no apologies for arguing that farmers cannot continue to be the at the sharp end of this pressure,” he said.

'Little confidence'

Statistics from the levy body AHDB Dairy indicate that, in New Zealand, the average milk price over the last year was ahead of the UK.

In Europe, in the past 12 months, the UK has lagged behind Northern European countries by between 2p and 6p per litre.

Mr Mitchell continued: “While there will be many varied reasons for this, the result is that dairy farmers in UK have little confidence that the supply chain is fairly sharing returns from high value dairy products with those milking the cows.

“This is a travesty as global dairy demand, both short and long term, remains strong. This week saw the positive sign of global auction prices for dairy commodities rising by more than four percent, largely due to weather issues impacting on production in New Zealand.

“It is a sharp reminder to all milk buyers and end users that they cannot take milk supply for granted.”

'Giving up'

The drop in milk prices follows news of official statistics showing a further decline in the number of dairy farmers in Scotland.

The statistics show an overall decrease of dairy herds in Scotland, down 4817 since records began in 1903 to 918 dairy herds in 2018.

Mr Mitchell said the figures are "another stark reminder" that dairy farmers are giving up, often because the next generation is not convinced that dairy is for them.

He said skilled labour shortages add to the weight of concern for dairy farmers.

“And while Scottish dairy farmers are amongst the most efficient – and always striving to improve - we need a supply chain that works to ensure the dairy sector is functioning for all,” Mr Mitchell added.

“There are solutions, and these must be based on increased trust and collaboration. A case can be made that the relatively high milk prices in Northern European countries, New Zealand and Ireland are to an extent due to a supply chain which values the contribution of farmers.

“That is underpinned by wider collaboration, shared efficiencies, commitment to marketing and government support for trade, education and regulation.”