RETAILERS MUST be made to pay more for milk, say the NFU, the UK’s largest dairy co-ops and Dairy UK.

Although no specific amount is being asked for, Tom Hind, NFU chief dairy adviser, said increases in energy prices and other overheads had probably added a combined 3p/litre to farmers’ and processors’ costs this year.

Farmers’ costs had risen by 1-1.5p/litre a year before indirect costs of milk collection and processing were taken into account, said Mr Hind. These included the equivalent of 0.5p/litre on labour, 0.2p/litre on feed, up to 0.5p/litre on fertiliser and 0.05p/litre on fuel.

“The sustained impact of these rises could be devastating for many British farmers. Price increases will be required to offset these losses.”

Jim Begg, director general of Dairy UK, said increased energy costs this year had added £5m to processors’ bills, higher wages £20m, and packaging costs on liquid milk £15m. A 14% hike in diesel prices also meant an extra £8m of fuels costs, he added.

But Mr Hind said it was unacceptable that increases in costs were passed back to milk producers at a time when 60% of them were already operating at a loss. “In the past dairy producers have absorbed the costs borne by others further up the supply chain. In the current market this is impossible and makes it all the more disturbing to hear talk of pressure on farm-gate prices in the coming months.”

He said the increased costs to processors would need to be met by their retail and food service customers as was the case in a properly functioning market.

Malcolm Smith, chief executive of co-op Dairy Farmers of Britain, said much of the responsibility to boost prices rested with processors, who he reckoned had been underselling their products.

“I have dealt with retailers for 25 years and if you make a case to them politely they will listen. Processors have a responsibility to the industry to have the gumption to make it clear to retailers that prices have to increase. If we don’t sort this out soon people will be putting Polish milk on their cornflakes.”

Arthur Reeves, managing director of direct supplies at processor Dairy Crest, said: “The crucial thing is to get the right price on an ongoing basis, and we as an industry have not been doing that over the past six months. Processors have been falling over themselves to get business.”

John Duncan, First Milk chief executive, said: “We fully back the view that producers continue to absorb the full force of cost increases within the dairy chain and urge the market to respond by supporting farmers at the farm-gate level.”

A spokesman for Milk Link said the co-op backed the move and was already talking to its customers to impress on them the increased costs members were having to bear.

David Handley of Farmers for Action said he welcomed any initiative to increase prices, but he was concerned about how any retail price rises achieved would be split between processors and farmers.