UK disaster overnight
UK DAIRY companies collectively shot themselves in the foot and virtually wiped out the industrys profits overnight when they first bought supplies from Milk Marque.
Eamonn Pitts, head of marketing at the Irish national food centre, told the Agra Europe dairy conference in London last week that the companies had expected their bids to be scaled back so they overbid. Milk Marque then increased the price twice before market balance was achieved.
He added that the sectors with the lowest profits, like cheese, had faced the highest price rises. "These increases could only be recovered by increasing the product price, or further dropping the profitability, so causing a crisis for processors," he said.
But bids in Milk Marques selling system this year had fallen slightly. And the European target price had increased by 3% so Mr Pitts said that, if there were no further currency changes, then Cheddar manufacturers might be able to return to some profit.
He said that the UK was the only European country to see an increase in milk prices in 1994. This was due not only to the dissolution of the milk marketing boards, but also to the successive currency devaluations. The price rise had moved the UK from near the bottom to the top half of the European price league table.
And Mr Pitts predicted that the UK would retain that position in the coming years.
The countries that traditionally topped the league table, Denmark, Germany and the Netherlands, would struggle to maintain their positions over the next three to four years, mainly because of their heavy reliance on cheese.
He said that cheese prices in the short term did not look healthy. GATT would increase imports and reduce subsidised exports. And while cheese consumption in the EU had been increasing at about 2% a year recently, manufacture had been increasing at roughly 4% a year. Until demand could catch up with supply, cheese producers would continue to suffer, Mr Pitts predicted.
Traditional farmhouse Cheddar at packaging stage at Quickes plant.