Morrisons follows Co-op in raising milk payments amid farmers' protests

 

Dairy industry expert Ian Potter says farmers lose money on milk production

Related Stories

A second retail chain has raised payments to milk suppliers after fresh protests by dairy farmers.

Morrisons announced increased premiums on milk for farmers, after a similar move by the Co-operative on Friday.

The government has said it will hold talks on securing the dairy industry's future with farmers on Monday.

The BBC's Norman Smith said ministers hoped more retailers would follow the Co-op and Morrisons' example and a code of conduct on pricing could be agreed.

He said the government wanted to avoid more blockades of milk processing plants by farmers who have been warning they could go out of business.

The protests which began on Thursday night continued on Friday and Saturday.

Campaign group Farmers for Action (FFA) is warning that cuts in the price paid to suppliers by dairy processors, combined with rising feed costs, could force hundreds of dairy farmers out of business.

Further protests

Analysis

Although minsters are adamant they will not legislate or fix milk prices, they are determined in the words of one source "to bang heads together".

The hope is that more supermarkets will follow the example of the Co-op and Morrisons, thereby easing the immediate pressure on farmers and averting the threat of more blockades.

This, it is hoped, will provide a "breathing space" in which ministers can seek to get all sides to agree to a new code of conduct governing milk prices.

That would slightly tilt dairy contracts in favour of the farmers by ensuring retailers could not cut prices without giving at least a month's notice. At present it is claimed some give only a few days' warning.

It would also allow farmers to terminate contracts with just three months' notice rather than the current 12-month contracts.

Ministers insist both sides need to be ready to compromise but they are "cautiously optimistic" that a deal can be reached this week.

The UK could end up having to import much of its milk, says the FFA.

Some dairy farmers say they are planning further action.

A second protest is planned for Sunday night at the Robert Wiseman dairy processing plant near Bridgwater, Somerset. The FFA's West Midlands branch has also warned of further protests.

Supermarkets assess how much it costs farmers to produce milk and then decide how much to pay above that as a premium, taking into account factors such as rising feed prices.

The FFA says supermarkets must pay more for milk and that this should come out of the retailers' profits rather than the cost being passed on to customers.

On Saturday, Morrisons announced it was increasing the premium to farmers on milk from 1p per litre (ppl) to 3ppl, as well as introducing support payments equivalent to 3ppl for farmers affected by the recent bad weather. It brings the total price they receive to 31ppl.

The increases - from 1 August when the processors' latest cuts come in - would help "to support all farmers, not just those that have dedicated contracts", said commercial director Richard Hodgson.

'Sustainable model'

On Friday, Co-operative announced the premium farmers receive would rise to 2.57 pence per litre with immediate effect, and to 4.27ppl when the processors' price cuts came in from 1 August. It brings the total price they receive to 29ppl.

Asda had already announced it would increase its premium from 1ppl to 3ppl from 1 August, meaning dairy farmers will continue to be paid 27.5ppl after the processors' cuts.

Milk graphic

Co-op and Asda ruled out the increase being passed on to consumers through rises in the price of dairy products. Morrisons has yet to respond.

National Farmers' Union president Peter Kendall welcomed the announcements but said a "sustainable funding model" was needed.

Environment Secretary Caroline Spelman and farming minister Jim Paice are to meet dairy farmers on Monday in Llanelwedd, at the Royal Welsh Show, one of the largest agricultural events in the UK.

The BBC understands the government is also arranging to meet representatives of the big supermarkets in the next few days.

Mr Paice said the price cuts by four leading dairy processors were "a severe blow for dairy farmers".

"Government cannot and should not set prices but I will do everything in my power to get all levels of the supply chain to make the real changes needed to guarantee the industry's long-term future," he said.

"Farmers and processors need to work together through an industry code of practice on contracts and retailers have to help shift the focus away from short-term practices which are completely unsustainable."

A spokesman for the Department for Environment, Food and Rural Affairs (Defra) said talks with dairy farmers aimed at agreeing an industry code of practice had been brought forward to Monday because the situation "must not drag on any longer".

Profit margins

As many as 400 farmers and 20 tractors blockaded a processing plant in Foston, Derbyshire, on Friday night, the FFA said.

Meanwhile, a four-hour blockade of the Robert Wiseman Dairies processing plant in Droitwich Spa, Worcestershire, involved about 200 protesters and 40 vehicles, according to West Mercia Police.

Farmers have been out in force to call for higher payments for milk

The FFA said 750 of its members in total turned out at both protests.

It followed protests by hundreds of farmers on Thursday night at sites in Somerset, Yorkshire and Leicestershire.

In the dairy industry processors set the price they pay farmers for their milk.

From 1 August, Robert Wiseman Dairies and First Milk are cutting the price by 1.7ppl, Arla Foods UK by 2ppl and Dairy Crest by 1.65ppl.

They say they have no choice because the price they can sell cream for on the commodities market has fallen sharply in the past 12 to 18 months.

The NFU said the cuts would be felt by more than a quarter of suppliers. An average farmer with about 150 to 200 cows, the union said, would lose about £37,000 in revenue from the combined effect of previous cuts in May/June and the new cuts in August.

Ian Potter, a dairy industry commentator, said: "The cost of production at the moment is over 30ppl and rising because with the wet weather the cost of feed is increasing quickly for the coming winter.

"In the last two months processors like Arla have dropped the milk price that they pay to farmers by 4ppl so farmers have been facing competing forces - the cost increasing and the price that they sell the milk for dropping."

He said retailers were making money on liquid milk while processors were working on "very thin or non-existent margins".

"They (processors) are not making any money, with a 4ppl cut the farmers are losing money, and the only people who are left are the retailers, who are making healthy margins," he told the BBC.

Farmers believe that blockading the processors would in turn put pressure on major retailers, he said. But he added it was likely farmers would begin blockading retailers this week.

 

More on This Story

Related Stories

The BBC is not responsible for the content of external Internet sites

Comments

This entry is now closed for comments

Jump to comments pagination
 
  • rate this
    -3

    Comment number 756.

    Unfortunately there are large parts of the UK dairy industry which are just not economic. Small herds in remote areas cannot supply milk at the market price. Its worth remembering that farmers recieve significant levels of public support via E.U. subsidies. In Wales 90% of the income of the average farmer is subsidy.
    NZ scrapped subsidies a few years back and now dominates the world Dairy Market

  • rate this
    -17

    Comment number 755.

    The farmers can complain all they like about the price of milk and the do have a fair point. But there's no foundation to their argument that the supermarkets should take all the blame simply because they have healthy profit margins.

    Supermarkets have customers and shareholders to look after, so why is nobody arguing their case to keep milk costs down?

    A very one sided argument if you ask me.

  • rate this
    -67

    Comment number 438.

    It's very simple: if this was a free market operating properly then supply and demand would align and suppliers and consumers would agree a fair price that ensured producers made a profit and consumers had a fair price.

    If farmers don't like the price they are being offered they can seek higher prices or no longer supply the product. At some point supply and demand align at a fair price for all.

  • rate this
    +65

    Comment number 352.

    As a farmers daughter, some of these comments are very upsetting. My dad was a dairy farmer but was forced out. His choice at the time was either to drastically expand the herd of 60 cows and spend money he didn't have or to continue beef farming and forget about the dairy. People don't seem to uderstand it's not just farmers livelihoods - it's their way of live the supermarkets are messing with!

  • rate this
    +94

    Comment number 345.

    I like to see cow's in English meadows, I like milk, butter, cream and cheese locally sourced. I am happy to pay what they really cost.to produce. I do not like is being manipulated by Supermarkets assuming that I would not pay more. The bigger picture is if our dairy Farmers are squeezed out, our dairy products have to come from outside the UK ultimately, yet again, our country will suffer!

 

Comments 5 of 19

 

More UK stories

RSS

Features

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.