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Stackyard News Mar 06

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Dairy industry urged to develop trust for a sustainable future

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Dairy farmers were joined by processors urging the dairy industry to develop much needed trust and integrity to enable them to adapt to the tough challenges ahead at the Royal Association of British Dairy Farmers National Dairy Conference staged in Cheltenham last week and sponsored by the Dairy Supply Chain Forum.

The need to put the past behind and develop trust between producers and processors who were mutually dependent on each other, was among the key messages. “The industry is adapting to the new post CAP reform regime, however we will have to face some further major challenges,” according to Dairy UK chairman David Curry. “The 2008 CAP Review will involve very tough negotiations and some radical proposals can be expected which could affect milk prices.”

Those facts were reiterated by the Minister for Sustainable Farming and Food, Lord Bach presenting the event’s keynote speech. He cited further world trade liberalization on the horizon leading to greater international competition. “Dairy farmers will also need to embrace the environment and improve the industry’s ecological footprint for example, through the Water Framework Directive and the Nitrates Directive.” However he pledged his confidence in the UK dairy sector saying: “I believe it can prosper in the future trading environment but collectively we need to work together to make that future a reality.”

So where do we start? Adapting to change would in the first instance be smoother without the current unease of the supermarkets’ perceived dominance on the industry’s shoulders. The OFT enforces competition and consumer protection laws, however its ‘obdurate’ approach was rebuked by the NFU’s Gwyn Jones, and according to Burges Salmon’s, Laura Claydon the Supermarket’s voluntary Code of Practice was ‘not working’. “The multiples continue to exert pressure as they take the bigger share of profit from dairy products, she said. Former CLA president Mark Hudson also expressed frustration that the Supermarket Code lacked teeth but urged the OFT not to prevent producers from combining their interests and therefore become less fragmented.

The OFT’s John Templeton retorted: “Our responsibility is to make markets work well for consumers. The OFT is not a price or market regulator. Dominance in the market is not illegal, abuse of a dominant position is.”

Progress would be more likely if producers and processors took a fresh look at their milk contracts, commented Dairy Crest’s Arthur Reeves. “It is essential we get accurate forecasting of milk supplies from farmers for us to achieve the flat profile Dairy Crest requires, otherwise volume surplus to requirement is sold at low prices. Dairy Crest’s new contracts, to be introduced in April, have been developed with the full involvement of producer groups. Accurate forecasting will be reflected by additional payments, but we collectively will achieve success only when there is sufficient trust between you and us,” he said.

On the consumer front, greater trust could be developed if farmers took a leaf from the egg industry, according to the University of Bristol’s Prof John Webster. “Free range eggs count for 50% of eggs retailed in the UK, a volume reflecting consumer’s respect for the hen,” he said. “We also need to breed cows fit for the purpose and I believe two different cows are required to meet the need: one to produce commodity milk and the other, added value. The drive should be for better productivity and not just genetic improvement. Better selection procedures are needed to breed more robust, modern cattle to meet the market needs.” he said applauding the USDA Lifetime Net Merit scheme.

Winston Reed described how technical specialisation combined with meticulous financial planning, including checking the cash flow weekly, was contributing to his successful Devon based farm featuring an 800 cow herd averaging 9,000 litres. “We manage a business, dependent on information, to operate within the current milk price,” he said.

Trust between himself and his staff was high on Mr Reed’s agenda, as was taking time away from the farm to recharge. A similar work life balance approach had been adopted by Roly Tavenor who operated a contrasting New Zealand system in Shropshire blocking calving 350 cows. Driven by attention to technical detail and the bottom line, he said: “I can’t influence my milk price, however I can cut production costs and exploit resources. I believe we have a future, it’s not orange; the future is green.”

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