DAIRY CRISIS NEEDS SUPPLY CHAIN TO TAKE RESPONSIBILITY

As recovery prospects weaken, Union calls for considered, collaborative approach
As short term recovery prospects for the crisis-hit dairy sector weaken, NFU Scotland has called on all parts of the supply chain to take a considered, collaborative approach to preserve the Scottish dairy sector.
The current downturn in milk prices – whether at home, in Europe or across the globe – is the longest and steepest in modern times, placing dairy farming businesses under severe strain.
In the past few days, two key milk purchasers – First Milk and Muller – have cut prices to Scottish dairy farmers while those supplying Arla have seen their March milk price held at February’s rate. A number of Arla Direct suppliers have also received 12 months’ notice on their contracts. Other than the small number of Scottish producers with a contract to supply supermarkets with liquid milk, the vast majority are receiving a milk price significantly below the cost of production.
The Union is reminding all those with an interest in the dairy chain – governments, retailers, processors and consumers – that dairy is a high cost, high risk sector. With the current market remaining dangerously weak, concerted action is needed.
It states that survival is dependent on working collaboratively with government (at all levels) to implement a sensible package of market tools, legislation, and trade levers; the supply chain shifting from practices which create short term winners and losers, and we urgently need well informed responsible banks and creditors to work with the industry to deliver long term sustainability.
NFU Scotland’s Milk Committee chairman, Graeme Kilpatrick, who farms near Kilmarnock, said: “The ongoing problems in the dairy sector must not be ignored or put back for another day. It merits urgent, well considered and collaborative action, or the consequences will be severe.
“The Arla price announcement, based on a transparent pricing mechanism which pays its farmer members as high a price as the business performance allows, can be seen as welcome stability but cuts elsewhere will erode any confidence that we are through the worst or provide any clear signal as to when the recovery will come.
“The processing and retail sector must come to terms with the fact that primary production is a vital part of the supply chain and deserves a fair and reasonable share of the rewards while carrying the majority of the risk.
“We are also in urgent discussion with government to work with us to ensure banks and other creditors work with producers and their advisors, and form a long term perspective to ensure dairy producers are in a position to ride this storm. Many dairy producers invested because the market signals were there for all parties to have reasonable confidence to invest in dairy. The world market collapse was not foreseen, and made worse by the Russian food ban.
“At the current level of milk pricing, even the most efficient and resilient producers are worried and NFUS is hugely aware of the psychological and financial impact on farmers. As well as having their business to run, and their cattle and staff to care for, these are family business of many generations.
“We continue to urge dairy producers to take practical steps to seek from their advisers or utilise the resources available through the Scottish Dairy Hub. On a more personal note it could be prudent to think about your neighbour and farming friends to ensure no one feels alone in these troubled times.
“Next week, NFUS will be in Brussels urging the commission to recognise its responsibility to the sector. The Commission’s belief was that the market mechanisms in place post quota would be adequate. They are not. The recent support package was knee jerk, ill thought out and insignificant in respect of the scale of the crisis.
“The commission refused to review the reference price on intervention because they believed the market would recover, and now they are seeking solutions when dairy producers are in a much worse position.
“Intervention and market support in times of severe market crisis must be reviewed. Short term, strategic volume management can help, but must be well considered and effective. The Commission must also release the potential funding from the European Investment Bank to deliver the financial support it was intended to deliver.”