Supply Chain Fails to Heed Warnings Over Milk Supplies
30/07/07

Retailers and processors have failed to heed NFU Scotland’s warnings that low farmgate prices will result in a drop in production and a loss of their supply of milk.

The Union made its comments on the day that the UK’s largest milk co-operative announced it is unable to honour its original contracts and supply the necessary milk to its customers.

First Milk today announced that it has invoked ‘force majeur’ on its August milk supplies due to a marked reduction in the milk supplied by its farmer-members.

NFUS has pointed to this as a further sign of the dramatic turnaround in the milk industry, with retailers in particular now losing their ability to dictate prices to suppliers. However, despite the strengthened hand of milk suppliers, there remains considerable frustration amongst farmers that the current market situation, in particular the dramatic rise in prices for dairy products, is failing to translate into a significantly higher farmgate price. This is leading some farmers to question their current supply contracts with milk buyers. From further discussions NFUS has had with the major players in the market, all the signals are indicating a major rise in the farmgate price is imminent. Therefore, the Union is reminding individuals to weigh up their options carefully before switching buyers and, crucially, to work collectively.

NFUS Milk Committee Chairman Willie Lamont said:

“We have been telling the major supermarkets in particular that the ridiculously low price paid to farmers supplying their milk, at a time of spiralling costs, will jeopardise future supply. They have largely chosen to ignore that message and, as a result, are now facing the consequences.

“We are witnessing a major shift in the balance of power in the milk market. It is now a sellers’ market. Supplies are extremely tight as a result of low farmgate prices, which have driven producers out of the industry. These have been exacerbated by spiralling costs and bad weather. On top of that, with huge rises in the prices of dairy commodities, the supermarkets can kiss goodbye to the days of guaranteed supplies of milk at prices which are unsustainable for farmers.

“Power is coming back into the hands of producers and for that reason it is vital that we act together. I share the frustration of individual farmers who are thinking of tearing up their current supply contracts because improved returns are not coming through. I would, however, urge anyone thinking of that to weigh up all the consequences and to contact their current milk buyer with their views, preferably through the producer group.

“From the discussions we are having on an almost daily basis with processors and retailers, I believe we are on the verge of a dramatic uplift in prices and farmers need to ensure their have a reliable route to market.”

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