THE DAIRY supply chain is not operating properly so it is not clear what accounts for 36% of the retail price of milk, MPs have concluded.

The environment, food and rural affairs select committee has published a report which says it has been unable to account for 18p/litre of the retail price of liquid milk.

Although the committee says the evidence it has received leads it to believe the money is being taken up by dairy companies‘ costs.

“The dairy companies will of course need to use some or all of that 18p/litre in collecting and transporting raw milk and processing it into liquid milk,” admits the report.

“We believe that the dairy companies should provide dairy farmers with a detailed justification of why it is that they appear to need to take such a significant chunk of the retail price of liquid milk to cover their costs.”

The report, published on Tues (June 8), recommends that the government takes steps to improve transparency in the supply chain and establish who makes what on liquid milk.

It also suggests that the government could address the “engrained adversarialism and blame culture” that characterises the sector.

But it acknowledges that the level of mistrust in the sector and the lack of knowledge about how much money people are making are linked.

“Relations within the industry will continue to be poor while there is uncertainty about the proportion of the retail price retained by retailers and processors,” it warns.

On the issue of what farmers can do to help their situation the report suggests the only way for producers to really gain greater control over the price of milk is to join a co-op.

“We urge those dairy farmers who are not members of farmer-owned co-operatives to consider carefully their decision to remain outside the co-op framework,” it says.

The report also recommends that retailers need to place more weight upon their “social responsibility” to ensure a sustainable farmgate price for British dairy farmers.

They should aim to establish a balanced spread of suppliers by increasing the proportion of products, such as liquid milk, they buy from farmer-owned co-ops, says the report.