Union blasts milk price cut

SENIOR figures in the NFU Scotland have slammed the milk price cuts announced last week by Arla and First Milk.

NFUS vice-president Gary Mitchell, policy manager George Jamieson and milk committee chairman John Smith all blasted the companies.

Mr Mitchell, a dairy farmer from Stranraer who currently supplies Arla, said: ‘Arla’s price cut of 2.5 euro cents per litre takes its milk price down to a very uncompetitive UK price of just over 26p per litre.

‘That is very disappointing for Arla suppliers, who are also owner members of the co-op. As a company that prides itself on its global exposure, added value brands and innovative initiatives, this price does not reflect the ambitions or expectations of its farmer owners, nor the wider dairy community.

‘As a co-op which judges itself on its ability to generate returns to its farmers, there must be a case for Arla-elected farmer leaders to hold the management to account over this unacceptable price.’

Mr Jamieson added: ‘At the turn of the year, NFUS highlighted the ill-advised, hasty retreat on milk price by processors at the first sign of a weakening market. We had hoped that improving market signals in recent weeks would stall unreasonable price cuts.

‘Some commentators have supported NFUS in challenging processors. Milk prices in 2017 did not reach the heights the market justified, which should have taken farmers close to 32p per litre. Instead, the average price in 2017 was 28.8p, almost 10 per cent lower than in 2013 and 2014 when commodity prices were actually lower than they were last year.

‘The sad and unacceptable fact remains that milk pricing is at the discretion of the processor, who has the power to effectively set a price to manage their margins and manage their risk. That is neither fair nor efficient and the long-term competitiveness of the UK dairy supply chain will suffer.

‘A question which the UK dairy supply chain must address is whether we delivering enough of the added value in dairy produce back to the farmers. Over the past year, according to AHDB, the average EU price has been 2.8p to 2.95p per litre ahead of the UK. Achieving the EU average price would mean an extra £40,000 to the average dairy farmer in Scotland.

‘That brings fresh focus to the very welcome comments recently from the Grocery Code Adjudicator on milk contracts. NFUS, with our UK union partners, have long advocated contracts which addressed agreed pricing, volume, risk and transparency rather than imposed these.

‘First Milk’s cut is another very disappointing announcement. While accepting the reality that First Milk can only pay what it can afford as a members’ organisation which needs sustainable business, this is a blow to farmers in Scotland who are facing severe feed issues.’

Mr Smith, a First Milk supplier who farms in Kintyre, said: ‘We need Scotland and the UK to be a good place for dairying with all involved in the chain getting a fair return for their commitment, effort and investment.

‘Today’s price news is disappointing given the strengthening seen in commodity markets of late.

‘I am in regular dialogue with First Milk, have already spoken to Arla representatives since my appointment as committee chairman earlier this month and I am meeting with Arla in Lockerbie at the beginning of March.

‘These price falls must not spark a repetition of previous downward spirals where producers are left to carry all the burden. Production costs have soared with the very wet summer and autumn of 2017. Silage stocks are tight and the price of straw for bedding is more than £100 per tonne up on last year.

‘The Grocery Code Adjudicator is in discussion with the industry. Post-Brexit, we need contractual arrangements that promote fairness across the whole dairy supply chain and protect it from bully boy tactics.’