Milk Price Hikes Must Feed Back into Dairy Supply Chain
02/06/08

The decision by major retailers to substantially increase the shelf price of fresh milk must be filtered back to other parts of the dairy supply chain in a fair and transparent manner according to NFU Scotland.

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The milk industry’s levy organisation, DairyCo, points out that Asda, Tesco, Morrisons and Sainsburys all increased their liquid milk prices in May. The price of a four-pint polybottle (approximately 2.2 litres) rose by 10 pence to £1.44. Year on year, the price of a four pint polybottle has increased by 29p (25 per cent) – from £1.15 to £1.44. The price increase paid by shoppers for their milk varies by size of retail container but overall, the increase in price is between 4 pence per litre (ppl) and 4.5ppl.

DairyCo’s economic analysis suggests that the retail price of milk has increased by 12.7ppl since May 2007 while over the past year, farmgate milk prices have increased by around 8.1ppl. DairyCo concludes that processors and/or retailers have more than passed on to consumers the extra cost caused by higher farmgate prices perhaps in order to cover their own increased processing and distribution costs.

NFU Scotland Milk Committee Chairman, Willie Lamont said:

“We can have little complaint if retailers choose to increase the shelf price of products to reflect the increased costs that they face. However, there is also an onus on such companies to ensure that all parts of the chain have the same opportunities to cover their increased costs of production.

“At this moment in time, the costs associated with the feed, fertiliser and fuel required to keep a dairy farm going have doubled compared to the same time last year. Recent price increases of 0.5p to 1.0p per litre for those who supply these major retailers with fresh milk are a small step in the right direction. These recent increases in shop shelf prices must also be used to drive forward the prices paid to farmers.

“Retailers also need to recognise that the spiralling costs associated with producing milk affect all dairy farmers and not just those producers providing individual retail chains with their fresh milk. The future of those whose milk ends up in cheese, butter, yoghurt or health drinks are wholly dependant on substantial milk price increases filtering through from retailers.

“Retailers have an opportunity to send a clear signal to producers that their milk is wanted by ensuring that those milking the cows receive their fair share of the price increases seen on the shop shelf.”

· The following table from DairyCo maps the changes in the retail prices for fresh milk across a number of pack sizes:

According to DairyCo, the average price of milk in the ‘big 4’ supermarkets across all the pack sizes was 52.28p per litre in May 2007, rising to 60.72p per litre in September 2007 and averaging 64.98p per litre.

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