21 September 2001

Milk producers call for better contracts soon

By James Garner

DAIRY companies believe that farmers are earning enough money from milk, but producers who attended The Plunkett Foundations annual conference in Coventry this week made it clear that they are after better contracts this autumn.

Jim Begg, director general of the Dairy Industry Federation, told the conference that bank managers consider dairy farming to be less of a risk than the average manufacturing firm and that confidence and optimism is returning to the industry.

"The milk price has gone up from 16p/litre in the middle of last year to not far off 20p/litre. This is the result of movement in the market through competitive negotiations, which some people said could not happen unless there was major restructuring in the industry.

"Instead it has been achieved by innovation and packaging development. We have to take milk from a commodity to a high-value premium product. The supply chain is now more focused."

But Andrew Chadwick, a dairy farmer from Kinnerton, near Chester, said more money is desperately needed. "When you consider rent, borrowings and drawings, we are still making a loss. What other industry calls it a profit before it pays its management? The truth is the milk price went up because of resistance by Farmers For Action and that is not a sensible market."

Other delegates called for supermarkets to charge more for milk and stop treating it as a cheap commodity.

Jill Eisberg, head of communications at the Dairy Council, said: "There is the possibility of developing brands and packaging, but the consumer has to be targeted. Selling milk in Mr Men cartons to nine year olds is not good targeting."

Others pinned hopes on farmer-controlled processing. Four major supply co-ops – Zenith, First Milk, The Milk Group and Milk Link – have all said they will move into processing and drive costs out of the supply chain.

But Mr Begg cautioned against additional processing capacity. "It takes more than simply adding capacity to stimulate higher margins. Its more important to focus on the market. Adding capacity doesnt increase demand."

Barry Nicholls, head of Milk Link, said the group was looking at investing in existing processing. "We are looking to expand and becoming more vertically integrated and convert raw milk to add value. Theres a lot of costs that can be returned to farmers."