Indu split over Milk Marque future

By Vicky Houchin and Johann Tasker

FARMERS and milk processors are divided over whether dairy producers will benefit from last weeks decision to split up Milk Marque.

The National Farmers Union said the decision to restructure Milk Marque would “help to address the fundamental issues affecting the UK milk market”.

But the Dairy Industry Federation (DIF), which represents the dairy processors who are Milk Marques customers, was less convinced.

Milk Marque confirmed that it was to split last Friday (17 Sep.) in a widely-anticipated statement made by company executives after months of pressure.

The move followed a report earlier this year by the Competition Commission which accused Milk Marque of abusing its dominant market position.

Commission officials called for the enforced break-up of the farmer co-operative but their demands were rejected in a response by Trade Secretary Stephen Byers.

Instead, Mr Byers imposed restrictions which severely limited Milk Marques plans to expand into the lucrative dairy processing sector.

To overcome that ruling, Milk Marque decided to restructure itself into regional companies with a much-reduced market share.

The three companies born out of Milk Marques ashes will be free to start up their own milk processing facilities or set up joint ventures with existing dairy processors.

Ben Gill, NFU president, said today he believed Milk Marques decision to disband was the right one which recognised the commercial reality of the UK dairy industry.

But Mr Gill added: “Our view remains that the [Competition Commission] report and the Department of Trade and Industrys response to it was misconceived.”

Both documents were, “misleading and failed to grasp the need for farmers to be able to add value to their product in a highly competitive global marketplace.”

Mr Gill said the NFU would continue to challenge the commission report as a matter of principle because of its wider implications for the agricultural industry.

Other farmers voiced fears that Milk Marque might be being over-ambitious in its plans to get the new companies up and running by next April.

West Sussex Milk Marque member Jim Harrison, who has 800 cows, said the time the co-operative had to implement the changes was diabolically short.

“Its a very big job to do in a very short time,” he said.

Mr Harrison also expressed concern that European farmer-owned dairies were merging while Milk Marque was having to split up.

“It just shows how mad the world is,” he said.

Mr Harrison felt that Milk Marque might lose a few of its members because of the restructuring but said it would probably gain just as many.

The trick to a successful future will be getting a good progressive board and chief executive for each of the regional companies, he said.

“We want a complete clear out and start again. We want a clean sweep and start with people who have a clear vision of the future.

But Jim Begg, DIF director general, said splitting Milk Marque into regional co-operatives would only partly implement the commissions recommendations.

Breaking up Milk Marque was just the first move in correcting the co-operatives dominant market position and further steps were still needed, he said.

“Of particular concern is the potential for processing facilities to remove milk from a quota restricted market in order to artificially squeeze milk prices.

“It is vital for us to protect the future competitiveness of our industry.”

If just one of the new regional co-operatives built up processing capacity it could create a vertical price squeeze on the whole industry, said Mr Begg.

“That is what we want to stop.”

Mr Begg declined to comment on whether dairy processors would be prepared to enter joint-venture agreements with any of the new regional milk suppliers.

Dairy producers had to understand adding to the UKs existing processing capacity would not generate higher prices for farmers.

“Farmers have got to understand that when they make the decision to go into processing,” he said.

The DIF now hoped to see that none of the “anti-competitive activities” identified by the Competition Commission were repeated by the new companies.