Dairy turmoil must not be repeated says NFU

Later this week the NFU is expected to tell a House of Commons Committee that the dairy 'turmoil' of 2012 must not be repeated as a part of its inquiry into the future of the industry.

The delegation will include Deputy President Stephen James and Milk Board Chairman Aled Jones.

"The events of this summer have to be a turning point" said James.

"The decision of processors to slash milk prices attracted a huge amount of interest and led to headline news – in fact it was only pushed off the front pages by the Olympic Games."

"Whilst these price cuts have been withdrawn, the long-term sustainability of the industry remains uncertain."

Dairy farmers are likely to face worrying tax bills this winter, despite many producing milk at a loss following well-publicised price reductions by processors.

Although cash flow and profits are already tight – and likely to be even tighter over the winter months - farmers stand to incur hefty tax charges in January, following comparatively good milk prices in the 2011/12 financial year.

"While profits may not have been at levels farmers would have liked, accounts being produced for that year indicate that the income for 2012 rose compared with the previous year" said Mike Butler, senior partner at accountancy firm Old Mill.

"Where profits rise, tax liabilities rise also."

NFU Deputy President Stephen James said the dairy sector 'has been a source of tension' in the last decade.

"The key problem over many years is that dairy farmers have routinely failed to see prices rise as fast and as high as the dairy commodity markets."

"Yet, when these same markets fall, the milk price paid to farmers drops like a stone. This is a clear result of the exploitative nature of milk contracts and lack of negotiating power that currently exists."

The dairy coalition said milk buyers must be more transparent and clear about milk pricing policies.

The coalition, which includes farming associations who protested at milk price cuts earlier in the year, said more should be done to help ease the crisis within the dairy industry.

Following meetings with processors, retailers, milkmen and dairy farmers the clear theme is a lack of transparency about where money is going and who is getting what from the market.

At a meeting in Stoneleigh in October, members of the coalition called for transparent milk price policies, clearer country of origin labelling and further price rises for struggling British dairy farmers.

"This summer though has to be a turning point" James added.

"The current supply chain inequities must be resolved. There is real opportunity ahead and if we can get things working properly and fairly then there is real potential for investment to meet higher domestic demand and to export to a growing world market."

NFU Cymru Milk Board Chairman Aled Jones said, "This summer’s campaign led by dairy farmers to protest against severe cuts to milk prices captured the imagination of the public."

"The profile generated by the SOS Dairy campaign combined with lobbying by the Dairy Coalition has resulted in some significant progress.

"The activity of the Dairy Coalition this summer has been the key in all of this and the Coalition now seeks to expose bad practices, including non-compliance with the code of best practice on milk contracts and to ensure the supply chain is transparent and fair."

Farming associations have called for reform to introduce fairer contracts.

This has been rewarded by agreement on a voluntary code of best practice on the contractual relationships between milk buyers and dairy farmers.

"It does offer a number of benefits and protection to farmers, but this is of course subject to effective implementation. Our clear message to the Committee is that the events of 2012 must not be repeated. There is real opportunity to put things right and to do so we need the continued support of MPs," Jones said.