Producers take smaller share of retail milk price

By FW staff

FARMERS share of the retail milk price has fallen by 20% in the past three years, according to research from consultants Brown & Co.

The farmgate milk price fell 5.8p/litre between December 1995 and December 1998 to 19.25p.

But over the same period, the retail price slipped just over 3.5p/litre to 59.5p/litre. This means a dairy farmer receives the equivalent of 32% of the retail price compared with 40% three years ago.

“For the UK dairy producer, the challenge must be to redress this balance and secure a greater share of the net retail margin,” says Brown & Co Rob Hughes. The recent trend to small producer groups must be reversed, and processors need to invest in processing capacity, he adds.

  • Key areas

    According to the British Retail Consortium, falls in farmgate prices cannot be matched by lower retail prices, with raw milk only accounting for a small part of the total costs. Bottling and transport are key areas, especially after rises in vehicle excise duty and diesel prices, says a BRC spokesman.

    But Jim Begg of the Dairy Industry Federation questions whether the reports findings are representative. “You have to be wary of taking selective points, and should look at this on a long-term basis.”

    He also questions the studys recommendation that extra processing capacity is needed. “That would be a retrograde step. Surplus capacity means lower farm prices.”

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