30 August 2002

Cutting processing

capacity is way to increase milk price

By Marianne Curtis

IN the face of a strong currency and weak commodity markets, reducing milk processing capacity through better co-operation between producers and processors will help in the battle to secure a sustainable milk price.

That is the view of former Express Dairies chairman Chris Haskins, who will address a Dairy Event Spotlight on Profit forum next month.

"There is a crisis happening in dairy farming and I cant offer any easy answers, but as long as there is too much milk processing capacity, supermarkets will be in a position to negotiate prices down."

While Lord Haskins believes it is the responsibility of the government to check that supermarkets are not abusing their power from time to time, an absence of evidence means it is difficult to work up a case against them.

"Supermarkets are not the villains of the peace; processors and producers can do far more to help themselves. Retailers are paying too little for milk, but who can blame them when there are so many suppliers?"

While theres no chance of a return to Milk Marketing Board days, Lord Haskins believes two or three national co-ops would be more sensible than the current plethora of processors.

Investing further down the supply chain – as in the recent deal when Milk Link acquired 600m litres of processing capacity from Express Dairies – will also help improve returns, he adds

However, Lord Haskins believes producer investment in Amelca – which recently called in the receivers only three months after opening – was misguided. "To invest in additional processing capacity is crazy."

But in the short term, there is a chance of milk prices improving, he says. "The industry is still suffering the effects of the foot-and-mouth crisis.

"Producers overestimated the deficit created by culled herds and stepped up production. However, we should see less of a surplus in the second half of the year which could strengthen prices. &#42

2002 Spotight on Profit forums programme

Wed, Sept 18

11am Elliot Morley, MP – Opening address.

Noon Terrig Morgan, NFU – Issues affecting Britains dairy industry

and the role of the NFU.

2pm John Bourne, Krebs study leader – Controlling bovine TB?

3pm John Duncan, Federation of Milk Groups – Creating an

effective milk group federation.

Thur, Sept 19

11am Jim Begg, Dairy Industry Association – The DIAL Team,

Keeping an Eye on the Ball.

Noon Simon Mead, MLC – The challenges of fallen stock.

1pm Lord Haskins – Dairy farmings role in rural development.