Dairy Farmers Should Benefit From Better World Milk Prices
10/07/07

The Tenant Farmers Association has called on all dairy companies to share the benefits of improved milk prices with their suppliers.

Speaking at the Great Yorkshire Show in Harrogate, TFA National Chairman Reg Haydon said “In recent times we have seen significant increases in prices for milk and milk products on world markets. Since the beginning of the year prices for both butter and skim milk powder have increased by 40 per cent to £2300 per tonne and £2150 per tonne respectively. Cheddar prices have also increased by 20 per cent over the same period to £2250 per tonne1. However prices to dairy farmers have been small by comparison and are only just beginning to register. Some of my members are still having to cope with milk prices at 18p per litre and below which is unsustainable”.

Dairy farmers have been particularly hard hit by low profitability due to low milk prices and many have been forced out of business. Investment decisions have been put on hold even though new legislation for Nitrate Vulnerable Zones and compliance with the EU’s Water Framework Directive will mean that many businesses will have to consider erecting new slurry stores and installing new dirty water systems.

“With every second dairy farmer being centred on a tenanted holding, these investment decisions can only be based on a strong business case. Tenants do not have the value of the farms to rely upon when borrowing money. If we want to sustain a dairy industry long-term then we must ensure that farmers receive a fair price for their milk,” said Mr Haydon.

“Of course the farming press has been full of stories in recent times of individual supermarkets and milk purchasers seemingly offering better deals to their milk suppliers. However, upon closer inspection these are not always as beneficial as they first appear. This is either because the price increase does not apply across the entire milk output of the producer or because costs are added through insistence on changes to the way the milk is produced. I am concerned that this will lead to a tendency to set one producer against another which is something we need to avoid,” said Mr Haydon.

“We must also look at the development of more flexible contracts for milk supply. Currently most milk producers are tied into contracts which require them to give at least 12 months notice of termination. That is not good for competition and leaves producers in a weak negotiating position when prices rise as they have done in recent times,” said Mr Haydon.

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