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Fighting for a Fair Deal Diversification May Be the Answer for Dairy Farmers

Posted on: Friday, 19 August 2005, 09:00 CDT

WILL the milk run out?

Scottish dairy farmers predict it will unless they receive a fair price for the milk they produce. For the second year running, and the second time in a fortnight, they have resorted to direct action in a protest over pricing policy. They warn that the blockade of milk tanker depots will intensify, cutting off supplies to the whole country, if their demands are not met. Their gripe is straightforward.

While milk prices in the shops have steadily risen, they maintain, their share has been eroded to the point where it is the economics of the madhouse formany dairy farmers to continue in business.

They have a point, but it is not the whole story. Milk prices are set by the fiercely competitive supermarkets.

They have the muscle, and have not been afraid to exercise it, to drive down the shelf price and keep the consumer, ever eager for a bargain, happy. The supermarkets' clout is further enhanced when there is a glut of milk, as is the case at present. If there is more than enough of a commodity available and the price is cheap, but some suppliers provide it at a cost that is too high for the market, there is usually only one outcome: the suppliers in question go out of business. That is, unfortunately, the brutal reality in many areas of business.

Should dairy farming be any different? It is difficult to fight backwhen supermarkets are in the driving seat.

Milk pricing is an opaque matter. Last year, a Westminster parliamentary report into milk pricing was unable to find out what happened to 18p of the (then) 50p-a-litre cost. If parliamentarians, with access to all parties in the milk chain and backed up by researchers, are left perplexed, what chance does the dairy farmer have?

It is a pious hope to expect shoppers to pay more for their milkwhen there is over-supply. That is one consumer habit unlikely to change.

Production subsidies are, rightly, no longer an option. These are now paid to encourage farmers to diversify and pursue environmental options. There are possibilities for dairy farmers to go into organic milk and other added-value dairy products which enjoy a greater variety of outlets, including the increasingly popular farmers'markets.

If milk prices have been rising, but the farmers' share has failed to keep pace (which does seem to be the case), one solution is for them to go directly into processing. Farmers need to be in co- operatives before they can consider this option (about 50per cent are) as it can involve a long-term financial outlay. It does not entirely solve the problem, as farmer-owned processors would need to adjust farm-gate prices as required by the supermarkets. But at least this would cut out the middleman and might, perhaps, help answerwhere the missing pennies per litre go. It would make more sense to consider this and the other options outlined rather than threaten an escalation in direct action. Supermarkets would simply source their supplies from elsewhere and Scottish dairy farming, which has already taken big knocks in recent years, would be left in a more parlous - and less sustainable - state. That is not what dairy farmers, orwe, want.

Source: Herald, The; Glasgow (UK)

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