9 July 1999

Producer fury at

milk price slight

By Shelley Wright

DAIRY farmers, although relieved that Milk Marque will not be broken up, are furious that competition watchdogs and government believe milk prices are too high.

Releasing the long-awaited Monopolies and Mergers Commission report on the supply of milk in Britain, trade secretary Stephen Byers rejected the recommendation that Milk Marque should be disbanded.

He did, however, accept that major changes to Milk Marques selling system were needed because the organisation had exploited its monopoly position, keeping prices higher than they should be.

"Consumers pay more for fresh milk than they should, and the competitiveness of the dairy processing sector is being damaged," Mr Byers said.

That was welcomed by the Dairy Industry Federation, but NFU president Ben Gill dismissed the suggestion as "deeply offensive". He added: "It is a statement that is demonstrably untrue. The fact is that UK milk prices are the lowest in Europe."

Mr Byers decided not to disband Milk Marque because of the effect it would have on farmers.

An enforced restructuring could also take up to two years to complete. "This would in itself introduce worrying uncertainties for the industry," he said.

Although Milk Marque was relieved at this decision, managing director Paul Beswick said the implication that milk prices were too high had "serious consequences for the dairy farming industry in this country".

Producer prices had fallen by almost 25% in the past two years, with farmers receiving only about 10p/pint for milk that was sold for about 25p/pint in supermarkets.

And John Sumner, policy adviser to the Royal Association of British Dairy Farmers, questioned how government could believe that the competitiveness of processors had been damaged.

"Dairy companies continue to publish profits at a time when many dairy farmers will have great difficulty continuing in business, let alone make any profit," he said.

Mr Byerss acceptance that Milk Marques plans to increase its processing capacity could operate against public interest has also infuriated farming leaders.

Banning the co-op from investing in further processing facilities without the prior agreement from the Office of Fair Trading was unacceptable, the NFU said.

Mr Byers has asked the director general of fair trading to advise on a new selling system by the end of the year.

In the meantime, Milk Marques July selling round will be allowed to continue.

, although with a number of interim remedies to prevent any abuse of market power.