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

 

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

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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.

 

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  • rate this
    +9

    Comment number 340.

    The price breakdown says it all. 34p profit for the retailers, 11p loss for the farmers. How can that ever be justified? If the farms weren't being subsidised they'd have gone out of business long ago - Except given that would mean no milk for anyone I doubt that would have happened.

    It's simply a case of retailers exploiting farms because they can, because they are subsidised.

  • rate this
    +7

    Comment number 339.

    I live in the far SW of Wales, farming country and a lot of it dairy. I am not a farmer but i do support their right to a fair price for their products.

    Also..... @ 61. Where the hell are you going to get your milk from, if every dairy farmer stops producing milk to do other things ?????????????

  • rate this
    0

    Comment number 338.

    46. Lodekka

    "Once again we owe farmers a living. Where were they when the mines and steelworks were cut?"

    I expect they were getting on with their job, without holding the country to ransome as the miners did, and what a good job they did of persuading people conditions had not improved for 200 years.
    Population up, food production down, much we could produce now imported, Madness.

  • rate this
    -3

    Comment number 337.

    Come on Waitrose, do the right thing ! Which chain will be last to realise there's a PR battle to be lost here ? I'm guessing money-grubbing Tesco will probably give in last. Farmers deserve fair payment for milk and any supermarket trying to force them to sell at a loss is out of touch with reality. We don't just want good value, we want dependable supplies from properly-paid farmers.

  • rate this
    +10

    Comment number 336.

    I support the farmers wholeheartedly. Once we have got the supermarkets to play fair, I think we should turn our attention to people like Muller and Nestle and other bulk buyers of milk for the processed food industry.

  • rate this
    +9

    Comment number 335.

    308. LogicGunn: Exactly. A central detail of this is that supermarket margins on milk have increased while farmer's margins have decreased. Why should that happen even in a 'normal' market? Supermarkets are making farmers pay the cost, of their price wars and loss leading, simply because they can. They're grossly abusing the power that results from their massive size.

  • rate this
    +9

    Comment number 334.

    283. EnigmatiSC
    The greed in the supply chain is astounding.

    I am surprised that you are astounded, this has been going on for years.

    And now the supermarkets sell insurance, grant loans etc.

    ALL big business, especially international business, is bad for your health.

  • rate this
    +3

    Comment number 333.

    We have to get used to the idea that everything for cheap has become massively unstustainable, not just for products sourced abroad in poorer countries, but here in the UK too. It hurts, but it's reality: less disposable income because we should be spender a larger proportion on necessities.

  • rate this
    +5

    Comment number 332.

    @ 313. Name Number 6
    "GENERAL FARM ASSISTANT
    Person required to work on a dairy farm, 5 days a week to include weekends, 5am starts.
    MEETS NATIONAL MINIMUM WAGE"
    And that comes out of farm income, which for Dairy farms is falling and stands at an average of £47k, business income not salary, according to defra. £13k a year out of £47k ... not leaving much for the farm's running costs, is it?

  • rate this
    0

    Comment number 331.

    294. josef24

    So how many hours a day, days a week and weeks a year do you work?
    +++
    Between 10-14 hours a day, last month I worked 28 days and this month it will be the same.
    Thing is I'm not moaning about it because I quite like what I do and I didn't block my employers entrance with my car.

  • rate this
    -2

    Comment number 330.

    Get them all to produce organic.
    It tastes better and is actually very good for you.
    And charge what it's worth - I'll happily pay the extra for decent quality

  • rate this
    -1

    Comment number 329.

    I suppose its too much to ask why the British Farming Industry such as milk is not subsdised by the EU or is that just for the French farming industry???

  • rate this
    +6

    Comment number 328.

    Capitalism impoverishes people.

    We have allowed banks to endow little green worthless pieces of paper with value. The banks then 'swap' us these pieces of worthless paper in return for our labour. They then devalue the pieces of paper with inflation in order to keep us in debt forever.

    There endeth the lesson.

  • rate this
    +3

    Comment number 327.

    This whole situation reeks of a cartel, which I thought was illegal. It looks like a conspiracy by a group of companies to fix the price of a commodity for their own benefit, which is manipulation of a market.

  • rate this
    +3

    Comment number 326.

    Public Sector workers have been trying to get the government to negotiate about their plans to make massive cuts to public sector pensions for well over a year with no success but as soon as their farming friends are upset they will talk immediately!

  • rate this
    +3

    Comment number 325.

    This is the start of the big businesses in squashing the smaller farms.

    Why do they want to do this? there are plans submitted for super dairy farms where herds will be in their thousands. Last year one application (8100 cows) was withdrawn but the big dairy processor plants are not giving up and further applications are in process.

    So where is all that muck going to be spread then?

  • rate this
    0

    Comment number 324.

    Farmers were pleased when the Milk Marketing Board was abandoned. Some of them thought that they would be able to play daries off against each other for a better price, The supermarkets, however, do the same thing with the dairies.
    All milk was sold via the MMB, and farmers knew what they would be paid. The customer also knew the price at the shops.
    Ah well, progress, I guess !

  • rate this
    +8

    Comment number 323.

    ‎Robert Wiseman Dairies, Britain's biggest fresh milk company, started this by cutting the price paid to farmers by 2 pence/litre in June, as well as the planned cut by another 1.7p in August.

    Wiseman's was TAKEN OVER BY EUROPEAN DAIRY GIANT Muller in January.

    Hmmm. Someone suspicious of Europe might think they wanted to put British dairy farms out of business...

  • rate this
    +2

    Comment number 322.

    Don't farmers receive subsidies in the form of tax relief for their products and their fuel? I know that sugar and dairy are the two biggest subsidised industries by the EU.

  • rate this
    -23

    Comment number 321.

    How easy it is for the gullible British public to be manipulated into thinking something is awry when in fact it isn't, this time by the dairy farmers ably assisted by the good old BBC.

    The milk you drink has always been, and always will be, produced from a British cow by a wealthy British dairy farmer.

 

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