19 August 1997

Producers advised to invest in processing

By Suzie Horne

WITH the liquid market declining by up to 2% a year, milk producers have no option but to invest in processing to take up the surplus.

Processors have not invested in the manufacturing sector, said Andrew Dare at this weeks European Dairy Farming Event. As such, Milk Marque Develop-ments (recently incorporated as a separate limited company), has to create further demand.

Contract processing would continue. Converting "spare" milk in Holland into butter and skimmed milk powder over the summer had produced a return averaging 1p/litre better than intervention.

And the group is currently signing new contracts with up to 17 dairy companies, in the UK and abroad, to extend the initiative into the winter months.

MMD is also in talks with other parties about joint ventures and acquisitions. This could result in an announcement before the end of the year, said Mr Dare.

MMD would be moving into the processing sector, "but without going head to head with our customers". Efforts would be concentrated on volume products to take up of the 10-15% of milk which was not bid for at the last selling rounds.

Chief targets would be the 200,000t of cheese and 100,000t of butter imported each year.

Producers would not be asked to contribute capital in the short term. But if the processing route is established as a long-term venture, then contributions may be sought.

&#8226 Milk Marque must be careful not to try to recreate the Milk Marketing Board by adding a processing arm, warned shadow minister for agriculture David Curry. "At a time of rationalisation within dairy companies, why are we considering building another one? I would need a lot of persuasion to be convinced it was the right move, and Im sure the OFT would take an even closer interest."