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
    0

    Comment number 440.

    126.
    AhimsA
    3 Hours ago

    Boycott all dairy products!Dairy farming results in the suffering and/or death of millions of cows every year in the UK.Unless they can start to produce milk in a humane way and not use cows as machines I have NO sympathy for 'our' farmers.

    This really shows how little you understand dairy farming.

  • rate this
    +9

    Comment number 439.

    In Finland, even adults drink milk with their meals at home. We've had price wars but consumers opt to pay a bit more for Finnish milk, instead of bit cheaper imported milk. We like our cows, and by law, they all have names! All calves born in the same year have names with the same letter. Towards the end of the alphabet, milk cartons had a competition to think of names starting with X, Y or Z!

  • 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
    +10

    Comment number 437.

    People will by fair trade coffee, orange juice because of some guilt that we must help Africa but won't support the farmers in this country.

    So why dont just retailer just take a smaller cut as its about 30% of the total cost


    Look at big buisness and get fisted

  • rate this
    0

    Comment number 436.

    Lets face it guys the Tories have not and never will protect British Industry.

  • rate this
    +10

    Comment number 435.

    A couple of years ago, the Co-operative group dropped their milk supplier who were themselves a co-operative (Dairy farmers of Great Britain) for their current supplier, so they could cut costs, now they 'increase' the price to the farmers, very ethical, I think not.

  • rate this
    +6

    Comment number 434.

    Support our Farmers! Supermarkets should pay the Farmers true value & yes that means consumers will have to too. But that is way better than having to eat & drink imports.

  • rate this
    +3

    Comment number 433.

    @421. chrisk50: Reading back at the illogical nature of NN6's posts and the fact that anyone replying to him gets modded down in seconds (then up slowly), I assume there's some good, old-fashioned baiting/trolling going on.

    Obviously he wouldn't work for less than it costs him to drive to work; obviously he doesn't work 25 hours a day; and obviously he is just having a bad weekend, or a laugh.

  • rate this
    +2

    Comment number 432.

    I wouldn't pay £1.50 for a bottle of French water either, I can buy 6 x 1.5 litre bottles for 3€ 40 .... the UK supermarkets are, as you say over there "having a laugh" !

  • rate this
    +5

    Comment number 431.

    To 385 Mike R

    "If farmers want more money for their product they should charge more...."

    Are you for real? Do you have any idea of how the market works? 6 major dairy firms control the milk market - farmers can either sell to them - at prices THEY set - or go out of business, which more and more are being forced to do. 6 major supermarkets control the price oflmost all food sold in the UK.

  • rate this
    +3

    Comment number 430.

    415 ObjectiveSee
    Aggressive cattle? Those docile black and white patched milk producing bovines that the Dutch gave us?
    Surely you're referring to the handsome Aberdeen Angus.

  • rate this
    +4

    Comment number 429.

    Big business is a menace and a terror to society. Put small retailers out of business and rehire them for the minimum wage. They benefit nobody but a rich elite and are the reason most of the country is now in a race to the bottom.

  • rate this
    +7

    Comment number 428.

    So, on four pints of milk, retailers make 34p profit, farmers make 11p loss.

    How can anyone can think this is reasonable?

    And the UK needs farming:

    We need to produce things - not just import and borrow all the time.

    National security is not just about armed forces - the less we can feed ourselves the more vulnerable we are, including to severe economic crises.

    & environmental stewardship.

  • rate this
    -5

    Comment number 427.

    Quite honestly, milk is meant for feeding infants. If we was meant to keep drinking it we would keep producing it.
    Milk Bars would be the best fun in town!!!

  • rate this
    +5

    Comment number 426.

    Why dont the farmers join together and start there own milk co op

  • rate this
    +7

    Comment number 425.

    I'm a townie, so don't normally support farmers - but in this case they are absolutely right! Love milk and love the animals that produce it and would hate to think that driving down costs would lead to farmers going out of business or any reduction in animal husbandry/ welfare. Let's all pay the going rate, keep farmers and livestock well, and enjoy our milk!

  • rate this
    -2

    Comment number 424.

    The problem we consumers have is that the price of goods is going up, and cheese is getting too expensive.

    I wish the farmers well, but there are limits to what I will spend, and I have often gone to the cheese display in the supermarket and looked at the prices and come away with nothing.

  • rate this
    +6

    Comment number 423.

    The facts speak for themselves if the price paid does not cover the cost clearly it is not sustainable. British dairy farmers are going out of business because of it. I am happy to pay more money for my pint if I know the farmer gets it. I do not want nocton style dairy 'farms' nor milk from outside the UK. Wish the farmers would process their own milk and sell fresh milk direct to us or shops.

  • rate this
    -8

    Comment number 422.

    As far as I've read, they are making more on other dairy products and meat - the wet weather is all that's making it profitless with milk.

    So, Morrisons are paying an 'extreme weather' premium for this year.

    But, at the end of the day, if farmers can't make it pay, they do, as we all do, have the choice of going off and doing something else to earn a living.

  • rate this
    +5

    Comment number 421.

    331. Name Number 6
    "Thing is I'm not moaning about it because I quite like what I do..."

    So you will accept a reduction in pay to 20% below what it cost you to perform your job.

    Tell me your employer and I'm sure we can make arrangements.

 

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