10 July 1998

MM selling change likely if milk prices dont rise

By Robert Harris

A SHAKE-UP in the way raw milk is sold looks likely if Milk Marques current selling round fails to lift farm gate prices.

MMs managing director, Paul Beswick, speaking to farmers weekly at the Royal Show, said he would be prepared to change the system to try to boost producer returns to "sustainable" levels.

"Many of our members are desperate. The money that has been taken out of farming must go back."

That is why MM announced it had raised the indicative milk price by up to 2p/litre for the July selling round and removed the 90% selling rule (Business, July 3). It also changed some of the contracts as a sweetener to buyers.

Dairy companies are not impressed. In a recent statement Gordon Summerfield, president of the Dairy Industry Federation, described the changes as radical and unwarranted. "The decision to introduce these changes is further evidence of Milk Marques abuse of its dominant position."

Mr Beswick refuted that suggestion. "The bid volume system assumes dairy companies bid independently. The problem is, the big companies have already signalled that the indicative price is too high.

"How can I possibly think they are coming to this independently? They have turned it into a farce."

Neither the current system, nor an open auction, which Mr Beswick suspects the Monopolies and Mergers Commission may recommend after it has completed its investigation into UK raw milk supplies, can work without independence, he added.

"I think what happens this selling round will colour ideas for the future. Farmers would be content with a fair return. They do not think they are getting it, and we have got to put this right. I would prefer an open market system, but that depends on customers wanting the same."

Unless that happens, Milk Marque could be left with little choice but to put a price on the table, and stick with it. Mr Beswick would not confirm such a move. But dairy companies had, in the main, announced "useful" profits for the past financial year, he said. After lower prices set in the last selling round, they have been on a "bonanza" since April, he added.

"No seller puts his goods in the shop window and says there you are, take what you like."

Jim Begg, director general of the DIF, said he was willing to talk about future arrangements, although the body has dismissed recent efforts as "talks about talks". "We are in this together; it is our joint futures we are talking about."

A mechanism which will clear the market at a competitive price is needed, though he would not go into further detail. "There are lots of ways that can be done, but we need a joint industry effort." &#42

Paul Beswick… Seeking a better price for Milk Marque members.