RESEARCH CARRIED out by the Milk Development Council for NFU Scotland has revealed that most farmers have received 10% or less of the agreed price increase from processors.
Retailers had agreed to pay an extra 3.5pence per litre to processors for liquid milk. The price of doorstep deliveries also rose by 2.5ppl. Of this at least 1.5ppl was to be returned directly to the producer to cover the increasing cost of production.
Yet, research by the MDC has concluded that only between 0.3ppl and 0.88ppl extra is currently being paid to producers.
NFUS has expressed its disgust that a cost recovery move for farmers has ended up with most only seeing a fraction of that increase.
Based on the MDC’s calculations, NFUS has concluded that up to 90% of retail revenue has disappeared elsewhere.
The MDC concluded that this missing money has ended up either with retailers or processors, but could not determine exactly where.
NFUS has today sent letters to the three major UK milk processors asking them why they have not passed on the level of increases expected.
Likewise, retailers have also been contacted for their explanations over the missing money.
NFUS President John Kinnaird said: “There has been plenty of rumour and mixed messages over who is really benefiting from the increase in prices for fresh milk and we wanted to get to the bottom of it.
“This MDC paper has really shed light on the state of the dairy sector and confirmed our worst suspicions. The retail price rise was to reflect farmers’ increased costs, but it has done no such thing.
“Instead, the margins of those further up the chain have been bolstered and producers have been left with a pitiful rise, already eroded by a round of price cuts.”
Fig.1 An MDC estimate of the increase that each of three main milk processors should be paying to producers. The table takes in to account the volume of liquid milk each processor sells into the market.
Expected farmgate rise from supermarkets price increase alone
Expected total increase to farmers (including middle ground & doorstep rises)
Actual increase to farmers
Farmers’ share of total 3.5ppl retail price increase