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Dairy Exodus Continues as Retailers Slash Prices

- Farmers bear the brunt of supermarket price war

More dairy farmers have left the industry in the first half of 2010 than in the whole of 2009 while the nation’s major retailers have embarked on a renewed milk price war as they try to compete with each other and the growing number of discount supermarkets.

Supermarkets have spent the last two weeks cutting the price of their low-fat varieties, while ASDA, significantly, have reduced the price of their main milk product.  Milk sales are growing as overall sales of pasteurised fresh milk have been increasing by 0.8% each year since 2006.  During the same period the discount retailers’ market share has roughly doubled, which appears to have sparked the reduction in milk prices now being seen in major UK supermarkets.

Meanwhile, the Scottish dairy exodus continues as retailers fail to ensure their producers are paid a sufficient price to run their business and invest in it.  This is causing dairy farmers to leave the industry at an accelerated pace; the Scottish Dairy Cattle Association (SCDA) has reported that 38 Scottish dairy herds were dispersed in the first half of 2010, compared to 41 herds in the whole of 2009.

NFU Scotland’s Vice President Allan Bowie said:

“The statistics speak for themselves; by a long shot the number one reason Scottish dairy farmers continue to leave the industry is because it is financially unsustainable.  When will our nation’s supermarkets learn that if they continue to pay their dairy producers less than they need to survive that they threaten the future supply of fresh Scottish milk?

“The fact that milk sales, and therefore milk consumption has grown each year since 2006 is a clear indication that fresh milk sales could be a real success story, but only if there is an industry there to provide the milk in the future.

“Retailers’ profits continue to be strong, but competition between the major supermarkets and their discount rivals, while it may appear in the short term to be in their customers’ interest, is undermining the nation’s ability to produce one of its staple foodstuffs.

“Time and time again the profits posted by the major retailers indicate that there is more than enough of a financial cushion for them to feed back a sustainable return along the supply chain to their producers.

“We have heard numerous statements from the retailers of their intentions to work with the industry for the good of all concerned, but price turf wars such as this show their priorities lie elsewhere.  NFU Scotland shall be contacting all the retailers concerned to ask how this latest spate of price reductions ties in with their promises to work with producers. 

“We shall also highlight the issue to the UK government as it prepares its new legislation in order to set up the Groceries Code Adjudicator and the EU’s High Level Working Group on dairy, which is examining the relationship between and profitability patterns of dairy producers and retailers.”

Notes to Editors

  • Tesco’s consultants Promar calculate the cost of milk production at 27ppl.
  • Tesco are currently selling Wiseman’s Fresh’n’lo brand at 25ppl, 2p below the Promar figure and thereby undercutting Tesco’s own dedicated suppliers.
  • ASDA is offering all its 4 pint (2.272l) bottles at 2 for £2, or 44ppl.
  • Feed costs have risen by 1ppl in the last week.
  • The Scottish Dairy Cattle Association reported 38 herds were dispersed in the first half of 2010 compared to 41 in the whole of 2009.
  • On a UK scale, latest census figures indicate that in June 2010 there were 16, 080 farmers, down nearly 700 (4.2%) on 2009 and 12,300 (43%) fewer than ten years before.
  • This is the second fastest attrition rate ever recorded; numbers fell by 44% in the 1970s.  There were nearly 200,000 dairy farmers in the UK in 1950.

Ends

Date Published:

News Article No.: 116/10


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