'Unsustainable prices have led to decreased consumer choice:' Ceam production decline hits dairy industry
The farming sector has become worried at recent concerns over declining cream production, with the National Farmers Union warning 'unsustainable farmgate prices' as the key reason why.
The cream production industry has endured difficult conditions during the past five years. Highly volatile dairy prices and heavy discounting of milk prices by supermarkets have squeezed industry revenue and profitability.
The industry has also been affected by changing consumer preferences, as consumers have shifted away from full-fat products in favour of low-fat and skimmed alternatives. These conditions have resulted in consolidation activity among industry participants.
NFU dairy board chairman Michael Oakes has responded to recent concerns over UK cream production: “We have long warned that unsustainable farmgate prices would lead to reduced production and in turn less choice for consumers of high-quality British dairy products. Manufacturers will do their upmost to ensure British milk and other fresh dairy products, such as cream and butter, will be on retail shelves this Christmas but this may mean moving milk away from cheese production which will impact on future cheese availability.
“The UK dairy sector has been under significant pressure over the past two years due to low prices that has affected the vast majority of dairy farmers. Farmgate milk prices have recently started to rise but dairy farming is a long-term business and it will take more than a few milk price increases to instil confidence back into the sector.
“This situation is not beneficial to farmers or the public so we need to find better ways of managing volatility for the benefit of all to ensure we see great British, Red Tractor-assured dairy products on shelves for the long-term future.”
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 in Scotland 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 in Scotland 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.
