Union writes to Adjudicator and Secretary of State on need for milk price transparency

Following on from its decision to slash the milk price paid to Muller Direct farmers, NFU Scotland and NFU England & Wales are expecting to meet with the milk processor next week.

NFU Scotland was shocked by the steep price cut of 1.5p per litre that Muller will be imposing on it supplying farmers come January 2018 and is looking for an explanation from the processor.

NFU Scotland Vice President Gary Mitchell said: “Such a large drop in price from Britain’s largest producer of branded and private label fresh milk, butter, yogurt, desserts and dairy ingredients needs to be properly explained.

“Why have Muller been the first to cut and cut so savagely when they have lucrative contracts that should provide milk price certainty to their dairy farmers?

“What makes the whole situation even worse is that this drop in price is out of line with our European neighbours and has, once again, left the UK market out of sync with the rest of Europe.

“The size of the UK retail market, and the percentage of milk that continues to be sold daily as fresh, should provide stability to prices, but it just hasn’t happened. Are we again seeing processors chasing retail contracts on price to the detriment of their dairy farmers?  

“Dairy farmers need answers and Muller needs to explain their action when we meet next week.

“It is impossible for the milk market to function properly while price transparency between farmers, processors and retailers does not exist. It is imperative that all sections of the industry are open and honest with each other for us to move on from the hard times of a few years ago.

“The reality is that, when commodity prices surged, farmgate prices were slow to respond and now that markets have softened, Muller has chosen to drop prices like a stone.  That has huge impact on confidence at a time when bank accounts have still to recover from the milk price crash in 2015 and 2016.

“At AgriScot, dairy expert Chris Walkland stated that analysis of all UK milk price indices showed that the average Scottish dairy farmer had missed out on between £40,000 and £45,000 of income based on what they could have reasonably expected to have received as a milk price in 2017 and what their milk buyers have actually delivered.

“We have written today to Grocery Code Adjudicator Christine Tacon and Secretary of State for Environment, Food and Rural Affairs Michael Gove asking them to do what is necessary to bring some badly needed price transparency to this market.

“As an example of the lack of transparency, it is now common knowledge that in aligned supermarket milk contracts there is a cream price tracker and rebate system - yet the industry knows little about how that operates.  However, it is hugely important in setting the milk price, as cream income to a liquid processor is currently worth 12.75p per litre - the 5th highest on record– when three years ago it was worth 5.5p.”

“That is value in the chain that should be getting shared with producers and isn’t.”

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Contact Bob Carruth on 0131 472 4006