Shropshire farmers still suffer despite prices rising

Dairy Crest has said that farmers on a Davidstow contract will receive 26.42 pence per litre (ppl) from August, an increase of 0.25ppl, although that will not benefit farmers in most parts of the country.

Meanwhile, the firm has also revealed the liquid milk price paid to farmers supplying all or a proportion of their milk on a standard liquid contract will continue to be 23.09ppl.

The organic liquid milk price will also remain unchanged, the firm said.

The cyclical nature of the dairy market suggests that the price will rebound, but farmers could face a wait of several months. Thom Kennedy reports.

Another month goes by, and another heavy blow pummels the spirit of Shropshire's embattled dairy farmers.

Major milk products including Arla, Muller and First Milk have all announced cuts to the price paid to producers in the last few days, while Dairy Crest provided a chink of light with a 0.25p increase for farmers whose milk is used in Davidstow cheese – which means those in Cornwall and the South West only.

British farmers upped the amount of milk they were supplying last year amid signals from the global dairy industry that there was increasing demand and a shortfall of supply.

Now, as the market has withdrawn, and demand in the high-potential Chinese market has softened, that has led to oversupply. In turn, global prices have slumped – the internationally-monitored Global Dairy Trade auction's price index has fallen every two weeks since early March, and higher-value products like butter are trading well behind where they were a few months ago.

The cyclical nature of the markets suggest that the price will rebound, but farmers could face a wait of several months.

In fact, there is not enough British-produced milk to meet demand in the UK, leading to milk being imported for the manufacture of more valuable products such as yoghurts and cheese.

According to the NFU's regional director Rob Newbery, more needs to be done by the government to ensure that British produce is going overseas, stimulating demand and helping rebalance the price of milk.

"We were exporting skimmed milk powder and cream, but unfortunately those markets have collapsed and the value isn't there," he said. "What we need to be doing is selling more high-value dairy products to export markets. It takes time, but we need more support from government."

Muller has been criticised for its cuts to milk prices, and this week took another penny from the standard price paid to farmers, but it too is affected by worldwide commodity prices.

"Supply of milk from farms in the UK and around the world is extremely high and this is affecting its value, which is currently low," said Graeme Jack of Muller Wiseman.

"Processors who are selling directly into these markets are returning well below 20p per litre now. We are working to add value to milk with yoghurts, chilled desserts, butter etc, so are able to return a leading price.

"But no-one can ignore the fundamental supply and demand challenges facing the overall market."

The announcement comes just a day after Market Drayton-based Muller Wiseman confirmed that it is to cut the price it pays to farmers for their milk by 1p to 23.15ppl from August 1.

It marks the first time in five months that Muller UK & Ireland has changed the price it pays for milk, but follows a pattern set by other major dairies over the course of the last week.

Arla Foods announced earlier this week that its suppliers will see their prices cut by 1.18p to 23.81ppl from next Monday. Embattled dairy-owned co-operative First Milk has also cut its price, by 1ppl.

Rod MacBean, who farms in Aston, near Wem, said: "My point of view is that it's not about the price they are saying they are paying, it's the actual price they are paying.

"The milk seems to be going into manufacturing, being used to be turned into cheese and yoghurt, and going on shelves. But I don't see prices changing in the shops so neither the consumers or farmers are benefitting.

"It's good that some farmers with Dairy Crest are seeing some light at the end of the tunnel but there's a long way to go."

Rob Harrison, NFU dairy board chairman, welcomed the move by Dairy Crest in a difficult time for farmers, many of which are being forced out of the industry.

He said: "It is encouraging that at last we have seen a positive move on milk prices after a series of negative cuts in recent weeks. Dairy Crest has bucked the downward trend and has shown some support for its farmers, with a small increase for the Davidstow contract, and I applaud them for that. Last month we saw cream income to the processor increase nine per cent, and for a business that has strong brands and a strong domestic market, Muller needs to be far better at explaining why they are dropping the price. This just smacks of a run to the bottom.

"Yes, milk production is still up in the UK, but across Europe volumes are starting to ease, and estimates for European production increases for the year are up at 1.6 per cent, significantly less than last year.

"Global demand for dairy products is still increasing by a steady two per cent each year. Milk buyers need to be clear with their suppliers of the volumes required to satisfy current contracts, but also to do their utmost to seek new markets for any extra milk produced and attain the highest value for those products, not just pass the buck down the supply chain."

Dairy Crest's Mike Sheldon said: "We are acutely aware of the challenges facing our supplying farmers.

We have therefore agreed to hold our liquid milk price for a further month, extending the period of stability to six months."

Martin Armstrong, head of milk supply for Muller, said all around the world, the imbalance between supply of milk from farms and demand for dairy products is weighing heavily on milk prices.

"We cannot buck this market, but we will continue to invest to increase the range of added value dairy products which we supply," he said.

It was also revealed yesterday that the chief executive of Dairy Crest, which closed its Shropshire operation near Telford in a cost-cutting measure, is in line to receive a £1.2 million bonus.

Mr MacBean added: "Someone somewhere is making a massive profit and that concerns me. There they are pleading poverty and then someone is apparently being paid all this money. It's the farmers that are paying for it."