January 31, 2005

 

 

Scotland's dwindling milk producers need fair prices to survive

 

THERE are now only about 1,500 dairy farmers producing milk in Scotland, but there is still a viable future for them - provided they receive a fair and equitable price for their milk.

 

That was the view expressed by Robert Shearlaw, the chairman of the National Farmers' Union (NFU), Scotland's milk committee.

 

Despite the latest Lloyds TSB Scotland's annual agricultural survey revealing that almost two-thirds of dairy farmers have no direct successor and that up to 30 per cent of those milking cows intend to quit within five years, Shearlaw was remarkably upbeat.

 

He said: "The barrage of reports that have emerged recently, many of them from independent sources, have emphasised the difficulties facing all our dairy businesses at the moment. However, I strongly believe that the efficiency and quality of Scottish production leaves us perfectly placed to meet the demands of consumers and retailers.

 

"The change that is required to ensure we can meet our full potential is simple: a fairer price, which reflects our costs of production and the margins being made by retailers and others in the chain."

 

Shearlaw once again highlighted findings from a report by the Milk Development Council last year, which concluded that supermarket margins had increased by as much as 10p per litre in the past decade while producer returns had declined by 6p per litre.

 

All the UK farming unions, as well as the militant Farmers for Action movement, have made their arguments to the major supermarkets. Discussions are continuing, as the union feels it unfair and unviable for producers to continue absorbing cost increases in farm output, saying that a retail price hike is necessary.

 

John Duncan, the chief executive of First Milk, the farmer-owned business with 4,000 members in Scotland, England and Wales concedes that the processing and retail sectors have had to meet additional costs, largely as a result of increased fuel charges and packaging. However, he argues that farmers are having to shoulder an unfair burden.

 

He added: "We estimate that, at best, across-the-board costs, including fuel, fertiliser, feed and contracted labour, have increased overall production costs for our average member by 1.53p per litre. And, if herd replacement is included, costs have increased by as much as 1.77p per litre."

 

NFUS is in agreement with that assessment, according to Shearlaw: "Aside from the general need for the farmgate price of milk to more closely reflect the shelf price, it is justifiable that, at the very least, producer returns are adjusted upwards to take account of the extra costs we are having to cope with."

 

Evidence suggests there would be little consumer resistance to a modest increase in the milk price. However, the problem for the four major supermarket chains - Tesco, Asda, Morrison and Sainsbury - is how the discount chains such as Lidl will react.