The NFU announced last week that it would write to the Department for Environment, Food and Rural Affairs (Defra), calling for an urgent investigation to safeguard the long-term prosperity of the industry. However, Defra confirmed that it would no longer be able to consider an inquiry with the election looming.
A spokesman told Food Manufacture that the request had now been delayed as stakeholders awaited the outcome of the national vote on 12 December.
He said that, at this moment, “there is widespread recognition of the issues in the milk market, but not much consensus on how to solve the problems”.
Dairy UK added: “The commodity liquid milk market is a difficult space to be in and processor margins are so thin, they are really the paste between the wallpaper and the wall for many in that arena.”
Tomlinson’s collapse
The request comes just a fortnight after the collapse of Welsh liquid milk processor Tomlinson’s Dairies Ltd, now in administration, which forced more than 70 dairy farmers to find an immediate new buyer for their milk and left many without payment.
“The recent collapse of Tomlinson’s brings into sharp focus some of the issues we’ve seen recently in the liquid milk market,” said NFU dairy board chairman Michael Oakes.
“Tight margins across the dairy supply chain have left us in an unsustainable situation with the farmer carrying much of the risk.
“There have been sharp cuts in the farmgate milk prices paid by most major processors to around 24/25ppl, well below the cost of production for many dairy farmers. This is putting severe pressure on those farmers who have not fully recovered from the 2016 downturn, which saw the farmgate price drop below 20ppl.”
Discretionary pricing
Oakes added that these price cuts had arisen because contracts between farmers and processors were based on discretionary pricing – where the processor could unilaterally change the price paid to the farmer, without consultation.
“No business can function or plan for tomorrow without certainty or clarity as to how much it will get paid for its product. We have been arguing for years that there needs to be greater fairness in dairy contracts, with risk and reward shared more fairly across the supply chain.
“To achieve long-term success, the UK dairy sector needs a viable supply chain with all businesses achieving sustainable returns and a more robust market for both farmers and processors.”
