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Stackyard News Jan 09

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Ian Potter Warns of Perils Facing the Dairy Sector

Renowned for his inventive and straight-talking commentary, leading industry commentator Ian Potter told delegates at the 2009 Semex Dairy Conference that the fortunes of the UK dairy industry could be likened to a game of snakes and ladders, and warned that it could be on the verge of sliding down a major snake if potential volatility is not effectively managed during what he describes as a ‘pivotal year’.

Ian Potter

Ian Potter

Recognised as one of the dairy industry’s leading events, the 2009 Semex Conference brought together a wide range of industry experts and progressive dairy farmers to discuss the changing nature of the industry and advise on innovative ways for farmers to grow their businesses. Ian Potter is no stranger to the event, but he says much has changed since he last addressed delegates in 2004. In many ways, he suggests that farmers are generally better off: they are ‘in demand’ from dairy processors, prices are more stable, there is an increasing demand for Western-type dairy products, interest rates are low, input costs are falling, and Britain’s island status offers key protection from imports.

He warned, however, that ‘the sterling effect has only delayed the inevitable’, and foretold of tough times ahead. “This month marks the start of a new era of milk price volatility. We face pressing dangers in the form of cheap imports and supermarket pressures. A recent Rabobank report recovered pointed towards a world-wide recovery in the demand for dairy products in late 2009, but I question their optimism,” he said.
He went on to predict a 2ppl reduction across Britain by as early as February, and told Semex delegates that there was much uncertainty over whether Tesco supplier contracts would remain in their current form, which guarantee a price greater than the cost of production. Arla Milk Partnership cut its price by 2 pence a litre in January; farmer co-op First Milk announced a cut of over 1 pence and Dairy Farmers of Britain has cut its price by 2 pence, backdated to November. It is not hard to see why farmers fear further cuts, and the prospect of supermarket price wars only serves to heighten concerns.

“Confidence is close to rock bottom and only one currency will inspire those remaining to invest and increase production: milk price. Only a reasonable price which covers costs will encourage investment – otherwise we face the prospect of many farmers quietly exiting the industry, as so many others have done already, and as we have seen in the pig industry. I urge everyone in the dairy sector – Government, retailers, processors and farmers to work together to ensure the sustainability of the industry. We have climbed ladders and we’re working our way up the board – let’s not throw it all away by slipping down a snake,” he concluded.

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