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Stackyard News Jan 2011

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Fears as Price War Makes Milk Cheaper than Water

NFU Scotland have today insisted that kicking off the New Year with a renewed supermarket price war on milk is sending out all the wrong signals both to Scottish farmers and Scottish consumers.


milking parlour

Consumers shopping in the major supermarkets can purchase eight pints of milk for £2 at the moment, cheaper than some of their bottled water. While in the short term this may look incredibly appealing to consumers, it is potentially a further blow to dairy farmers, many of whom are already struggling to survive. The history of price wars show that it is not supermarket profits that suffer the consequences, but those of their suppliers.

While dairy farmer confidence in the future of the industry remains at an all-time low, the majority of major retailers are continuing to undermine the value of our Scottish milk industry by using milk as a loss leader to draw customers into their stores.

Chief Executive of NFU Scotland, James Withers, said:

“The retailers have renewed their cut-throat battle for customers and we really fear that family farms, and ultimately shoppers, will pay the price. We have already seen Asda pledge that their groceries will be 10 percent cheaper than their rivals and now we see milk being sold at huge discounts.

“What makes this latest price war even more galling is that the plight of the dairy industry was highlighted just last month in a series of high profile protests by farmers across Scotland. With this drop in price, offering 8 pints of milk for £2, in many supermarkets you can now buy milk far cheaper than bottled water.

“The competition authorities have already made it clear that the financial squeeze on supermarket suppliers risks the future product choice for shoppers. Most of the major retailers have treated the competition authorities with complete disdain and whilst they claim they take the financial hit for these promotions, speaking confidentially to suppliers, we know the opposite is usually true. Price wars are easy to engage in when someone else picks up the bill. This latest round of price-cutting is irresponsible and further underlines the need for an industry policeman.

“Family farms are not looking for special treatment; just fair treatment. The average milk price for a Scottish dairy farmer is three pence below the cost of production. And whilst they lose money on every pint produced, retailers are making millions on milk and other dairy products.

“To ensure future supplies of fresh liquid milk and other products, we need to see a culture shift in the food and drink supply chain and both the exploitation of suppliers, and irresponsible pricing policies, must end.”

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NFU Scotland