Last updated: November 2012
Supermarkets and milk prices
In July 2012 the National Farmers Union (NFU) and Farmers for Action (FFA) embarked on a series of protests and actions against supermarkets and dairy processing companies. They claimed that buyers were forcing further price cuts on farmers when liquid milk prices were already below the cost of production.
DEFRA agreed that the average UK farmgate price for milk stood at 26.38 pence per litre (ppl) in July 2012(1) when the cost of production where a farmer could make a profit stood at over 30ppl.
Pressures such as low market prices for milk have been forcing farmers to leave the market and there are some fears that if prices continue to fall the dairy industry in the UK could disappear altogether. Between February 2005 and 2011, in Devon and Cornwall alone, 489 dairy farmers left the industry.(2)
Over the course of the last decade the way that milk is produced and supplied to consumers has changed dramatically. Just over 25 years ago, milkmen were a regular daily sight on city streets. However, when retail prices for liquid milk were deregulated in 1984, doorstep deliveries declined as shops began to sell milk more cheaply.
As most milk is now sold through supermarkets, this has led to stiff competition over price. In 2011, for example, Dairy Crest lost its contract to supply Tesco after it was beaten on price by competitors.(3)
Most of the main dairy processors also produce branded dairy milk for sale, and have been included on the main ranking table in the Milk buyers’ guide. Below is a table of the biggest supermarkets with their positions (as of September 2012) on how much they pay for a litre of milk. The statements were taken from the NFU website – which has been campaigning for milk processors to pay more.
Included on the table are the main companies known to have been supplying the supermarkets – some are not publicly available.
DairyCo’s website, which has a league table of the price of milk each contractor is paying, shows that M&S and Waitrose are actually paying the highest price in the industry for milk.
Morrisons’ milk is supplied by Dairy Crest and Arla and the company has promised an additional 6ppl. However 3ppl is to support farmers through bad weather and will be reviewed in October.
Iceland stated that its current price agreement was sufficient, while Aldi and Lidl both promised to add 2ppl to milk brought from processors.
The focus of the campaigning has now turned to milk processors. Ethical Consumer contacted the three main milk processors in August 2012 asking how they would ensure farmers are being paid the right price.
Dairy Crest stated in July that it had delayed a farmgate milk price reduction it had planned from 1st August to allow discussions with its customers on whether they would support farmers by paying higher milk prices.
Mike Sheldon, Milk Procurement Director at Dairy Crest, commented:
"We are in no doubt about the difficulties our non-aligned farmers have been facing and are confident that all our customers are now also aware of these difficulties and many are prepared to pay more for their milk as a result".
Arla confirmed that with effect from 1 October, Arla’s standard litre price will be 29.5 pence for Arla Food Milk Partnership members in the non-aligned Asda and Tesco seasonal milk pools.
Robert Wiseman owned by Muller Dairy UK did not respond to our enquiry, however it was reported in August 2012 that FFA held a protest at Muller’s Dairy in Market Drayton. The company subsequently announced an increase of its milk to 29ppl. The changes will only affect farmers operating contracts directly with Muller UK or Wiseman.
Too good too be true?
Kevin Bellamy, a dairy analyst, told Dairyreporter.com in September 2012 that this was ‘a good time for processors to honour their promises’ as cream prices had recently risen and had boosted companies’ profits. Bellamy went on to state that he thought the ‘industry maybe turning a corner’ and was interested to see what happened with Arla Foods, Robert Wiseman Dairies and Dairy Crest, and where they go next’.(4)
Ethical Consumer is part of a coalition of groups campaigning for a strong Grocery Code Adjudicator Bill which includes provisions on arbitrating disputes between retailers and suppliers, investigating complaints from suppliers to help end the ‘climate of fear’ and holding retailers accountable.
The bill received its first reading in the House of Commons on 3rd September 2012.