07 April 1998
Superstore milk squeeze hits farmers
as retailers ‘pocket the margins’

RETAILERS have squeezed the price they pay for milk at the expense of dairy processors in recent years – and now farmers are feeling the pinch.

Farmers are seeing the farm-gate price plummet, but can do little about it, thanks to the EU quota scheme and the strength of Sterling, according to The Times.

After years of using high-priced milk as a loss-leader, the superstores are able to pocket the margins as milk prices sink, thanks to the soaring Pound and cost-cutting by dairy processors.

Superstores have been building up their share of Britains liquid milk market over five years until they now account for almost every other pint sold, reports the newspaper.

Dairy companies have been restructuring, sacking staff and buying up small dairies, it says. The likes of Tesco and Sainsburys have encouraged this, reducing their suppliers to a few big groups.

Even a weaker Pound would not help the farmers as price support will soon go to be replaced by an even more politically embarrassing direct subsidy. The Times concludes the British farmer needs a bigger market share, but European Union quotas leave little scope for that.

  • The Times 07/04/98 page 27 (Commentary)