Strong message goes out to Britain’s processors and retailers

First Milk chief executive John Duncan has written to 20 leading supermarkets and retailers asking for their support for a 2ppl price rise across the total range of British dairy products stocked.

Currently negotiating for an increase from October 1, a break point in the co-ops' annual milk contracts, he is adamant that market forces clearly point to a 2ppl boost for hard-pressed producers.

"I have a clear remit to do all that is necessary to get the price up by this amount," he says. "The message from our producers is loud and clear – they support our negotiating stance and want to know, if we are not successful for any reason, where the blockages in the system are to be found.

"We are determined that, this time, the price will be applicable to all dairy products, and applied in such a way that the full amount is passed on to producers. This will, for example, put £200 a tonne on the cheese price."

In his letter to leading retailers and processors – including Tesco, ASDA, Sainsbury's, Marks and Spencer and Waitrose – John reaffirmed First Milk's view that the wholesale cheese price is undermining the milk price across the board… and says this must become a key discussion point in any October price negotiations.

In addition, he says recent market dynamics have been seen to favour the few at the expense of the majority, with the result that the stability of the whole dairy sector is now under question.

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"We've taken a long hard look at the prices realised in all sectors over the past six years, and remain convinced that the dairy farmer is losing out.

"For example, the gap between the supermarket liquid price, and the contract price, was about 10ppl in April this year – it was just 2ppl six years ago.

"Over the same number of years the supermarket share of liquid milk sales has increased from 65 per cent to 83 per cent (and still rising) today while, at the same time, doorstep deliveries have fallen from 35 per cent to 17 per cent.

"And, since October 2000, supermarkets have suggested that price increases to consumers for liquid milk have been passed back to farmers. Yet, in this period, supermarket prices have increased by 7.6ppl, while First Milk's contract price to liquid customers has increased by just 3.1ppl. In the same time frame the doorstep price has increase by 6.7ppl."

This bid to win over the retailers and supermarkets is a genuine 'first' for First Milk, and John hopes it will start a new phase in the negotiations.

"In our case contracts with major buyers are reviewed every March for deliveries from April 1. Then we have a break clause allowing a second negotiation in September for deliveries from October, enabling us to take advantage of any movement in the market during the summer.

"Now there's no doubt that our members are expecting us to deliver on price, and will accept no less than that which we all believe is right and fair. Many producers, advisors, consultants and buyers believe 2ppl is there -it's now up to the First Milk executive team to deliver that return.