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Opportunities for Dairy Sector Under Debate

09 September 2011

UK - NFU Scotland has challenged the nations' farmers to adopt a strategy to grow and develop the profitable global dairy markets, writes Sarah Lewis.

At the Dairy Event at the NEC in Birmingham this week, NFUS Milk Committee Chairman Kenneth Campbell said it was not an option to continue with poor milk prices, falling production and a growing trade deficit in dairy products.

He said the industry “was cocooned in a UK bubble”.

And he raised the issue that neighbouring farmers are not competitors, but it is the overseas dairy farms, who are the competitors.

He added that the future the global dairy industry is going to change enormously in the next few years.

"The challenge for the whole UK industry is, 'Are we going to lose our island mentality and grab a piece of this growth for ourselves?'” he said.

“Or are we going to continue to stagnate, give up market share to others and watch the rest of the world expand to satisfy the increased demand for dairy produce?”

Panel member Jim Begg, director general of Dairy UK, added that farms will need to get bigger and there will need to be fewer of them to achieve a target of 15 billion litres of milk per year.

He added that there are currently two farmer's leaving the dairy industry every day abnd these will be replaced by those farms that are expanding.

Mr Campbell proposed a strategy for growth in the dairy sector.

“We are currently 60 per cent self-sufficient in milk and dairy products in the UK and our dairy farmers are receiving the worst milk price in Europe," he said.

“There are nations that are approaching 110 per cent in self–sufficiency terms and their producers are receiving four to ix pence per litre more than here. That shows what can be achieved.”

Visitor's to the Dairy Event questioned Mr Campbell about how he is planning to raise milk prices.

He said that its not just about milk price. "It's margins. We need to learn from our European neighbours about having our market share.”

Mr Campbell added that the dairy industry needs to retain the value of the British milk market and he said efficiency will increase margin.

He added: “The industry must wake up to the fact that there will be political solutions delivered at a European level to fix this – strengthening producer organisations, compulsory contracts and more are all on the European agenda.

"We can divert our energies into using them if we have to but we would rather see a positive, commercial solution agreeable to everyone in the UK dairy sector – producers, processors, and retailers- to allow the industry to move forward as one.”

Discussions have also taken place with producers, processors, and retailers throughout the spring through eight road shows involving more than half the farmer's in Scotland.

Farmers at the NEC were cautious about rejecting a milk price formula, which tracks the milk price on farms and the risk of supermarkets capping milk prices and holding them down. Others suggested that the contracts should allow them to supply more than one customer and not be tied to a single outlet.

Farmers also asked why, if supermarkets sell Fair Trade products, UK milk could not also come under the same category to achieve a fair price.

They said they want a more formulaic system for pricing milk, which would be “fair, transparent, market- related price that is on level terms with prices being paid in Europe and give UK producers the confidence to move forward. That is an approach to pricing that accepts that it brings both risks as well as rewards.”

The farming community was told that it needs to work collectively and act together, and there needs to be more support for unions to increase farmer confidence in the industry.

Jim Begg called for the strategy from NFUS to include more milk in added value products, more innovation, research and development, efficiency and future development.

Mr Begg also said cooperation and partnership was needed especially between global suppliers and the processing industry.

Panel member Tom Campbell, Vice Chairman of First Milk said his company's joint venture with Frontera was a step in the right direction and farmer's needed to invest in added value to get returns and to reverse the £1.3 billion trade deficit.

He added: “It is up to farmers to change how they do business and to organise a structure for a collaborative future especially as most dairy farmer's are operating at break even or less.”

"There is agreat opportunity with young people to give them an industry to be proud of” which would also fit in with other NFU changes to policy.

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