Union meets Farming Minister Eustice on 'price transmission failure'
A farming union has taken the plight of the dairy industry to Westminster and put forward the case for producers to receive better returns.
NFU Scotland has said dairy farmers "continue to shoulder unsustainable losses despite a significant upturn in the market."
The union met with George Eustice, Minister of State at the Department for Environment, Food and Rural Affairs.
In the past month, the key dairy price indicators of Actual Milk Price Equivalent (AMPE) and Milk for Cheese Value Equivalent (MCVE) indicators – which reflect the returns from the dairy commodity markets - have gone up 24 per cent.
Spot prices for liquid milk are now over 35p per litre and the trade for cream is approaching record levels, currently £1.70 per litre.
Despite these positive signals, NFU Scotland informed the Minister that recent milk price increases from processors have not gone far enough to assist milk producers.
With AMPE at 26ppl, and MCVE at 28ppl, it remains among a concern among many farmers that the average price farmers in Scotland are getting paid for their milk is close to 20p.
NFU Scotland said this is a reflection that processors have some "significant" way to go if they are to pay dairy producers a "more realistic" price for their milk.
Supply chain 'must work collaboratively'
Graeme Kilpatrick, NFU Scotland’s Dairy Committee Chairman said the meeting was "constructive and frank."
"We covered a number of issues that are currently prohibiting the dairy industry from being sustainable and having a viable future," Mr Kilpatrick said.
"NFUS sincerely believes that the entire supply chain must work collaboratively to raise efficiency and sustainability.
"In the last seven weeks, it is evident that there has been a seismic shift in the global dairy market but farm gate prices are lagging behind."
According to DEFRA, the farm gate price is down from 23.45p per litre from July 2015 to 20.57p per litre for July this year.
At the same time, the price paid for butter has gone up by 60 per cent - from £1,900 per ton to £3,200 - between August 2015 and August this year.
Skimmed Milk Powder has also increased by a quarter, and mild cheese by 20 per cent per tonne.
Cream income in July 2015 was worth 4.91 pence per litre, and for July this year, it has risen to 7.9 pence per litre.
Dairy farmers not seeing returns
"The current market is moving quicker than the farm gate prices," Mr Kilpatrick said, "all market indicators are rising steeply but the farm gate is not.
"The return from cream for a liquid processor is up 3ppl but liquid price is reacting sluggishly, if at all.
"These significant increases in price are compounded by the fact that milk production is down by around 2.6 million litres per day on this time last year.
"Despite all these positive signals, dairy producers still aren’t seeing increased returns to allow them to run a viable and sustainable business.
"Contracts which better reflect the needs of the farmer and the processor are an essential prerequisite of an efficient and constructive supply chain and Mr Eustice accepted there is a need to develop better contracts and producer representation.
"Dairy farmers remain the price takers and we discussed options with the Minister which must create better and more effective contracts and price transparency transmission.
"We secured agreement of another meeting with the Minister to specifically discuss how the voluntary Code of Practice can be improved," Mr Kilpatrick concluded.
