…direct supply secures success
…direct supply secures success
DIRECT milk supply is, first and foremost, about achieving maximum efficiency in the food production chain.
This is the most secure route to a strong commercial milk price and a sustainable business proposition, which is precisely what Express Milk Partnership has delivered for its 1200 members since its inception immediately after deregulation.
Of course, this starts with cutting out the cost of a broker, or a milk co-operative, but a successful direct supply relationship goes way beyond this. There has to be benefits on both sides that extend beyond cutting unnecessary costs.
If these are tangible and sufficiently valuable, and also bring greater efficiency, you have the makings of a partnership that can operate successfully through good times and bad.
An eight-year track record in which all producer members have consistently received a milk price above the average of any co-operative is evidence that EMPs direct supply formula works. So what makes this a success?
The end use of the product is very important. Producers know their milk is going directly into the fresh milk markets that Express Dairies supplies, and that is both satisfying and reassuring.
By the same token, Express needs secure and stable milk fields, with good quality control and traceability. They achieve this through partnership, so both parties are gaining more than just cutting out the middleman.
No marriage is perfect and the direct supply relationship is constantly being tested, not least because milk price negotiation is at the core of its existence. The crucial thing is that there is strength on both sides and ultimately both parties have more to lose than they have to gain by walking away from the negotiating table.
Neither party can afford to put the other out of business, so the aim is to find the best price within the constraints of a global market place.
Ultimately, it is the macro-economic forces, such as exchange rates and the global supply/demand equation that set the broad pricing parameters. As a dairy processing business, Express has to deal with pricing in the same way that we do as milk producers, and it is a tough business on both sides.
Within this particular direct supply arrangement, producers can be confident that their price isnt being diluted by lower value outlets, or artificially supported, and thats important. Furthermore, they know the system is set up for maximum efficiency, in all areas of sourcing, transport and end product marketing.
EMP supplies direct to a business that leads the way in fresh milk processing and marketing. There is no reason why any other major operator should be able to do this better and provide a higher return to the producer. *
Jonathan Ovens, vice chairman of Express Milk Partnership, says direct supply is about more than just cutting the costs of a milk broker.