THE REAL PRICE OF A PINT

Milk prices have crashed under pressure from a combination of rising supply and falling demand, particularly as a result of lower-than-expected demand from China and Russia's ban on food imports. One factor that few people saw coming was Moscow's decision to ban EU dairy products, taken in response to sanctions over the Ukraine conflict, this has led to some 2.5 billion litres of milk not being sold in Russia.

The House of Commons Environment, Food and Rural Affairs Committee has revealed that Dairy farmers are being forced out of business every week by factors beyond their control. The Committee has called for the powers of the government's groceries watchdog to be expanded to cover dairy suppliers; The Westminster government has said that it was doing all it could to help farmers cope with the "volatility of the global market".

Despite all the rhetoric, I don’t expect the current or successive Westminster UK Governments to take any meaningful action to help our dairy farmers (or any of our farmers for that matter). Previous failures to act, I suspect are due to a combination of nice financial inducements from large Supermarkets and a more marked indifference to the agricultural sector.

At the end of the day if we want quality milk and dairy products (produced from UK milk or better made in Wales) then we will have to change the way we buy, then our farmers will get a better deal and we will get a quality product. One consequence of how we buy and how our milk is produced for us and how it is sold to us is that the number of dairy farmers in Wales dropped by a third in five years (up to December 2009) and this was despite repeated warnings that more needed to be done to save the industry.  

Before our farmers, dairy or otherwise, are driven out of business entirely they need action not words. If our governments at all levels (including the as far as agriculture is concerned apparently indifferent Labour in Wales run Welsh Government) do nothing then the future for agriculture may be grim, semi industrial and serviced by cheap (and probably exploited) migrant workers. Industrial milk production much trumpeted by some as the saviour of the dairy industry but it is not without its problems. 

There are waste issues, slurry production being one of them, which can be enormously toxic and environmentally damaging. There are also likely to be animal welfare issues when it comes to industrial farming. Modern cows to produce large amounts of cheap milk, a modern Frisian may produce as much 4 times as much milk as equivalent cows did 50 years but it only has three (milking years) in which to do this.

Historically the old answer to low milk prices or a surplus was to turn excess milk into other dairy products, like butter, cream, cheese and yoghurt's. The problem we in Wales face is that many local Welsh dairies serving our urban centres are no longer in business – some around Cardiff were bought up and sold off for housing and diary operations in some areas relocated outside of Wales. This means that we in Wales miss out, as Dairy products are potentially big business as some of our more successful smaller organic producers have proved.

The development of railway communications during the industrial revolution provided the means for rapid delivery of farmer’s milk to towns and cities and lead to a growth of diary production. The milkman delivered direct to our doorsteps, his near demise came later as a direct result of super market price-cutting which has now, more or less, effectively killed him off. The decimation of rural railways following a Conservative Government (questionably motivated) decision to favour road transport weakened the very infrastructure that had driven an expansion of the dairy industry. 

A 29 or 30 pence (gate price) litre of milk may end up being sold for 15 times as much, people pay good money for ‘health yogurt’ – which with the addition of bacteria, flavouring and a marketing campaign produce healthy profits for the companies that produce them. We have some excellent and very successful companies and producers doing just that, but, this potentially profitable sector of the agricultural economy in Wales is undeveloped. 

As for buying local - around 40 per cent of our yogurt is made in France and Belgium, in 2009 more than 40 per cent of all Cheddar sold in the UK was actually produced outside of the UK. Yogurt and cheese aside; its a pretty similar story when it comes to butter. The bulk of our butter comes from Denmark and Ireland, and this is despite the fact that farm gate prices for milk remain consistently higher in Europe than here in the UK.

We (in the UK) when compared with eleven years ago now import almost half of our butter from abroad, cheese imports are also up, some 60 per cent over the last eleven years (up to 2012). We are importing products that have added-value and are busy exporting the low-value milk products which are then ironically turned into butter, yogurt, etc and sold right back to us. 

This is madness; this is what happens in the developing or third world, not in the first world. In the developing world many countries have little choice but to export their raw commodities cheaply and then have little or no choice other than to buy back manufactured products made from their own raw materials.

Over the last 10 years Supermarkets’ margins (e.g. the amount of the price they take) on milk have doubled. Now with a trend for both the processor and retailer to be the same, we have a situation where they take over three quarters of the price of a pint. We have now reached the situation where in a land once renowned for Dairy farming and with cheap milk, we are becoming a net importer of milk. There is little point in hoping that the Con Dem Government (or a future New Labour one) will get its act together because they just won't.

WELSH MILK?

The agricultural industry makes a significant contribution to the Welsh economy and its employees deserve to be treated with fairness and respect. Yet unless urgent action is taken to tackle the cut in the cost of milk, the Welsh dairy industry will face a crisis that will drive farmers out of business and leave consumers facing a rise in shelf prices.

Plaid having long campaigned for a Supermarket Ombudsman welcomed the Chancellor's announcement that a Milk and Groceries Ombudsman would be established following the recent Budget. Yet many people (and Plaid included) have real concerns that the proposals will fail to give the Ombudsman any real teeth to ensure a good deal for farmers.

The proposed cut of two pence per litre of milk due to be introduced in August would leave farmers at a loss, paying more to produce milk than to sell it. This is wholly unsustainable and threatens one of the Welsh economy's most valuable assets. Any Supermarket of Milk and Groceries Ombudsman needs to take a serious look at the dairy industry and put itself squarely on the side of farmers against supermarkets and their shareholders.

Before the last Westminster General election in May 2010 there was much talk (even from the Conservatives) of the need for a Supermarket (and even a Milk) Ombudsman, when there was a pressing need for votes, since then there has been relative silence from Westminster, save for the Chancellors budget mutterings. The Supermarkets having purchased their tame politicos in the Westminster village (well before the Political Parties and Referendum Act 2000 came in) would be quite happy with a weak Ombudsman, who’s pronouncements they can ignore continue to aggressively pursue ever greater shares of the profit with minimal regulation.

At present one litre carton of full-fat, non-organic milk can cost around 65p (01.02.2012 figures). From this a farmer got between 21p and 28p. Production costs come in at around 28p. No wonder that over the last ten years two thirds of dairy farmers in England and Wales have gone out of business, that it is estimated works out as one dairy farmer leaving the industry every day.

The situation has not got any easier for the farmers or the consumers, especially as we now have to factor in increased transport and production (fuel) costs. When it comes to a fair deal the current milk prices make grim reading as  widespread promotions continue to be offered on liquid milk by the usual suspects. Supermarkets are also widely offering branded and organic milk on promotion – guess who takes the hit for cost cutting – the farmers!

The most recent DEFRA figures, show that the average UK farmgate price stood at 26.98ppl in May 2012 (it was 29.27ppl at the end of January 2012 and 29.38ppl in November 2011). The May figure showed a 0.85ppl (3.0%) decrease on the April average price. Annual comparisons show a 0.6ppl (2.3%) increase year on year. The GB average price was 27.97ppl in May, a 0.49ppl (1.7%) decrease on the previous month and an increase of 1.46ppl (5.5%) compared with May 2011. The Northern Ireland (NI) average for April fell to 21.99ppl, a decrease of 3.00ppl (12.0%) compared with April and 3.74ppl (14.5%) less than the previous year.

We are in the process of losing a critical mass of milk suppliers (something the NFU is only too aware of) and we have reached the point where UK farmers are no longer in a position where they can supply the UK's “core milk requirement” around 13 billion litres per year (2010 figures). In 2009 / 2010 year there was a 15 percent drop in UK Milk prices. If you look at the wholesale prices e.g. Butter, Cheese, Cream, etc the situation is no better.

Over the last 10 years that Supermarkets’ margins (e.g. the amount of the price they take) on milk have doubled. Now with a trend for both the processor and retailer to be the same, we have a situation where they take over three quarters of the price of a pint. We have now reached the situation where in a land once renowned for Dairy farming and with cheap milk, we are becoming a net importer of milk.

We (as customers and consumers ) also some of the blame because we let this happen, if we want quality milk and dairy products (that are produced in these islands from UK milk) then we will have to change the way we buy, if we do that then out farmers will get a better deal. There is little point in hoping that the Con Dem Government (or a future New Labour one) will get its act together because they just won't.

THE PRICE OF A PINT (PART 2)

Before the last Westminster General election in May 2010 there was much talk (even from the Conservatives) of the need for a Supermarket (and even a Milk) Ombudsman, and a pressing need for votes, since then there has been an effective silence from Westminster. One view from this side of the bridge that may be increasingly shared is that the Supermarkets bought their tame politicos in the Westminster village (well before the Political Parties and Referendum Act 2000 came in) so they can continue to aggressively pursue ever greater shares of the profit with minimal regulation.

At present one litre carton of full-fat, non-organic milk can cost around 65p (01.02.2012 figures). From this a farmer got between 21p and 28p. Production costs come in at around 28p. Over the last ten years two thirds of dairy farmers in England and Wales have gone out of business, that it is estimated works out as one dairy farmer leaving the industry every day. The situation has not got any easier for the farmers or the consumers, especially as we now have to factor in increased transport and production (fuel) costs.

When it comes to a fair deal the current milk prices make grim reading as the shelf price for four pints has remained largely static at around £1.27 for 4 pints since February 2011, and widespread promotions continue to be offered on liquid milk in May with Sainsbury’s and Asda offering 2 x 4 pints for £2.00 and Tesco offering 3 x 4 pints for £3.00. Supermarkets are also widely offering branded and organic milk on promotion – guess who takes the hit for cost cutting – the farmers!

DEFRA's annual data showed that the average UK farmgate price (Defra, Dairyco.net) stood at 29.27ppl at the end of January 2012. The GB average price was 29.38ppl in November 2011, 0.29ppl (1.0%) higher than the previous month and up 3.44ppl (13.3%) compared with November 2010. The Northern Ireland (NI) average for November was up slightly, to 28.76ppl, an increase of 0.20ppl (0.7%) compared with October and 1.07ppl (3.9%) more than the previous year.

What's happening is that we are in the process of losing a critical mass of milk suppliers (something the NFU is only too aware of) and UK farmers are no longer in a position where they can supply the UK's “core milk requirement” which is around some 13 billion litres per year (2010 figures). In 2009 / 2010 year there was a 15 percent drop in UK Milk prices. It is no coincidence that over the last 10 years that Supermarkets’ margins (e.g. the amount of the price they take) on milk have doubled.

Now with a trend for both the processor and retailer to be the same, we have a situation where they take over three quarters of the price of a pint. We have now reached the situation where in a land renowned for Dairy farming and where even though the price of our milk is cheap, we are now become a net importer of milk.

As early as 1914 the UK Government recognised that milk was important for nutrition in children, it helped prevent rickets, and provided vitamins. And so the first government attempts to regulate milks supply and quality came about. Pasteurization came in to kill of certain bacteria. We now have low fat milk, slimmed milk, semi skimmed milk, etc – one thing to think about is that full fat milk is only 4 percent fat, low fat milk being 2 percent (or less) and that milk is about 95 percent water anyway.

The banks (pre Mrs T) fell over themselves throwing credit at our farmers to encourage them to (as per Government and the EU policy) to expand their production. Mrs T’s particular brand of Conservatism was never that interested in farming, they were far more enamoured by the iffy money men in the City, so did nothing to prevent the imposition of Milk quotas (or their consequences) the bad times had begun for our Dairy farmers and oddly enough the banks stopped calling with offers of cheap credit.

As consumers we also have to take a share of the blame because we allowed all of these things to happen, if we want quality milk and dairy products (that are produced in these islands from UK milk) then we will have to change the way we buy, if we do that then out farmers will get a better deal. I think that there is little point in hoping that the Con Dem Government will get its act together, wake up and pull the fat (or the milk) out of the fire...because they won't.

EVERY LITTLE HELPS (NOT)

As Tesco begins a whole sale roll down of prices, to (they say) benefit consumers some serious concerns are being expressed about the consequences for our farmers and suppliers. Welsh farmers and food suppliers are concerned that the prices they receive for their produce are going to get driven down, as Tesco will make efforts to avoid cutting its profits.

With Tesco dropping some of its prices and effectively declaring a Price War on its commercial rivals and competitors, the question is whose going to pay for it? The £500 million pound 'Big Price Drop' is an attempt to maintain Tesco’s share of the market rather than grow it. The real question is will the Tesco shareholders or management be the ones who absorb the pain of the cuts? Or the farmers and suppliers?

The National Farmers Union (NFU) Cymru and the Farmers Union of Wales have serious concerns is about the prices farmers get paid for their produce. Their experience tells them that the larger food retailers often expect their suppliers to share the pain of any cut in retail pricing.

Tesco already has what could be described as a fraught relationship with some of the farmers it uses to source its products. The National Farmers Union has talked openly about a ‘Climate of fear’ in the (monopoly) world of modern food retail, where the small producers are too scared to speak out about the abuses that are impoverishing them because they may run the risk of reprisals and lose the only customers there are for their produce.

The Con Dem Government, just like it's New Labour predecessor, has been dragging its feet about the prospect of legislation to create a supermarket watchdog to investigate alleged breaches of the Grocery Suppliers Code of Practice. The code was introduced after the Competition Commission found large retailers were passing on excessive risks and unexpected costs to their suppliers.

Part of the problem may be that the Political parties may have readily got used to some of the perks of having a close relationship with the Supermarkets (or power companies, etc) with their glossy adverts in conference brochures, free food at funded functions, etc. One very old rule is that once you sell your virtue it stays sold, and once you sell your principles they stay bought and the end result is that the fabric of our democracy is damaged or tainted, and nothing in this life is free.

Perhaps a more pertinent question to ask would be what do they (the Supermarkets) get for their money? Or at least what are they seeking in lieu of their donations? Or even when do they get it? The answer may well be a weak and watered down Supermarket Ombudsman - which is the last thing any of us needs, whether as a customer, a supplier or a farmer.

CAN WE MAKE IT BETTER?

News that the number of people visiting high streets and shopping centres has fallen more in Wales than any other part of the UK sadly comes as no surprise. On my way to work in my home town of Newport, I walk past far too many empty or closed but partially furnished shops every day. The British Retail Consortium has revealed that footfall in Welsh towns and cities has dropped by 9.2% between April and July, the UK average footfall was down 1%.

Part of this is down to the recession, part of it down to the over reliance of local economies by chain retail stores and supermarkets, not to mention the cumulative damage that has been done since the 1980's with the growth of out of town or edge of town retail developments. Take my home town of Newport, where two Newport superstores set to open new stores barely a mile apart (within weeks of each other) and may create 650 new jobs. Morrisons in Lysaghts and redeveloped Tesco Extra in Spytty (both in the south of Newport) are due to open their doors in the autumn offering a combined 162,432 square feet of shopping space and employing up to 1,000 people.

Newport currently has 23 supermarkets, a significant number of which don't just sell food, for the record, we have:

• seven Tescos
• three Icelands
• two Asdas
• two Morrisons
• three Cooperative food stores 
• one Sainsbury store 
• three Lidl and 
• two Aldi supermarkets. 

Some of the larger supermarkets operating within the Newport area have been specifically targeting the smaller more local shopping centres. One of the consequences of excessive economic impact on local economies from the expansion of the supermarket sector is a loss of jobs as local businesses go under. Supermarket domination of the retail trade puts the local food infrastructure at risk threatening the viability of local wholesalers and small firms and the associated jobs in other businesses that offer support services i.e. banking, financial services, building work, packaging, etc.

The economic consequences of the generational failure to create a level playing field for local small businesses (not just in Newport) over the last twenty five years. This has been aggravated by a failure to redevelop Newport's commercial centre and the failure to restrict out of town developments; something that is now beginning to reap some pretty grim economic consequences.

A study by the National Retail Planning Forum in 1998 of 93 new superstores found that each one resulted in a net loss of 270 local jobs. The Federation of Small Businesses (FSB) noted that the UK is losing approximately 2,000 local shops every year and by 2015 (if this rate of loss is sustained) there there will be no independent retailers left in business.

This hits small businesses, consumers and our communities hard as they lose any real choice in the marketplace. Until fairly recently many or our smaller and larger towns, managed to retain a reasonably rich mix of local shops, small businesses and local suppliers. They have suffered in recent years as the usual suspects in the shape of “identikit” chain stores have run riot and replicated themselves across our nation's high streets.

Our Local Authorities (and here Newport is pretty typical) have been too often tempted as developers offering includes, sweeteners and inducements to ease the passage of proposed developments. They may be advised of the financial consequences of planning applications being taken to appeal if permission is refused and our elected representatives have been silenced by often dubious promises of potential jobs - so much for local democracy!

Local Authorities have failed to adequately research the implications of large scale developments on local retail needs within their development plans. If retailing needs have not been assessed then it’s pretty difficult to amend or refuse any potentially damaging planning applications from wealthy large developers, at which point local small businesses and consumers begin to pay the price.

Despite the lip service about improving the vitality and viability of our town centres, many out of town retail developments have consistently undermined this aim. Local authorities have turned a blind eye to the economic and social consequences of out of town or edge of town retail developments. The economic reality has fallen well short of the verbal aspiration, just look at the damage that has been done to Abergavenny, Chepstow, Monmouth, Newport and elsewhere.

How can local regeneration schemes ever hope to work, once the commercial heart of our high streets has already been seriously damaged. I don't have a problem with redevelopment but it's important to include an element for local retail and small businesses. Our small businesses end up being disadvantaged not just because of their inability to compete on level terms with the increasingly aggressive tactics of supermarkets and retail chains who are chasing an ever larger market share, but, because they get pushed out of the high street.

More than ever, our planners and our elected representatives at all levels need to think about the long term economic consequences of planning decisions. We need to take the longer term view, rather than get fixated on short term financial gains and questionable inducements from developers and the often hyped up promise of jobs.

Locally, in Newport, Labour ran the show from 1981 until 2004, effectively presiding over the run down of the town centre and a rapid expansion of out of town shopping centres, which to be fair even if they had opposed no doubt the Conservative run Welsh Office would have retrospectively approved. Yet even with New Labour in power in Westminster from 1997 and occasionally in Cardiff (from 1999) the local Labour run county council did little other than to sit pretty on the top of the pile.

They paid the price in 2004, being swept from office as New Labour's unpopularity grew. They lost control for the first time since 1979, but managed to run down the finances before election day. Now Labour in Newport is puring like a cat waiting for the cream, as they expect to be swept back into office, on the back of an unpopular Conservative - Lib Democrat coalition government, so they can get their noses back in the trough.

Next May, Newport goes to the polls and the election should be about more than merely throwing out the current lot out because of the record of their government in Westminster. Especially if the electorate is merely going to replace them with another lot who ran the town into the ground, when they ran the place previously. Repeating the mistakes of the past won't solve the current problems that beset our town at the moment, come May 2012 we need real change.

MORE THAN A WATCHING BRIEF?

The decision of the national assembly's enterprise and business committee to study the impact of out of town retail parks, and ask whether enough is being done to help local communities and businesses, should be welcomed. With our local retail sectors were already struggling before the triple whammy of inflation, job insecurity and public spending cuts. The economic fate of our small towns and their regeneration should be a prime focus of the national assembly.

The Federation of Small Businesses in Wales (FSB) has already called for national assembly ministers to draw up a retail strategy to support traders. They, quite rightly, want supermarket schemes to include a study on their effect on local stores and for shopping developments to subsidise space for smaller outlets.

As I have said previously we are in dire need of a new fresh approach to supporting small town and rural businesses, which are the lifeblood of our small towns and the economy across much of rural and non rural Wales. People have now recognised that economic and social problems in our communities are increasing; and the historic Government indifference to local economies and local economic needs cannot be allowed to continue.

The Federation of Small Businesses (FSB) has previously noted that the UK loses approximately 2,000 local shops every year and that of this continues then by 2015 there will be no independent retailers left in business.
Over recent years in the small towns, that once rich mix of local shops, small businesses and local suppliers have come under pressure as the usual suspects in the shape of “identikit” chain stores have replicated themselves across our nation's high streets” rapidly eliminating any real choice from our town centres.

A cynic might wonder if the London based parties close financial relationship with some of the developers (UK wide and more locally) might have had an impact? Over the last twenty five years retail developments have consistently undermined our small towns economic cohesion and vitality, local authorities have either effectively turned a blind eye to the consequences of out of town or edge of town retail developments on the edge of market towns in England and Wales, or even colluded with the developers.

Despite the mistakes of the recent past, it’s not too late, with the abolition of the business rate for small businesses, better thought out more long term economic redevelopment plans and a change in attitude towards our small businesses, local suppliers it is possible to support our small town centres which should be making a significant contribution to our economy. The first step towards fixing this problem is to stop repeating the ill-thought out mistakes of the past, especially when it comes to planning and economic redevelopment.

Every Government since the 1980’s has talked the talk about promoting the vitality and viability of our small market towns, when in even the Conservatives under Mrs. Thatcher recognised the problem, but, did next to nothing to prevent the damage being done to our towns. I and more than a few people expect better from the National Assembly and will follow the proceedings of the national assembly enterprise and business committee with a keen interest.

CRYING OVER SPILT MILK

Successive UK Governments (both Conservative and Labour) have failed to take any meaningful action to help our dairy farmers. Why? Well the cynic or the realist (in me) suspects that this is either down to a combination of nice financial inducements from large Supermarkets and / or a general indifference to the agricultural sector. We, as consumers also have to take a share of the blame because we allowed all of these things to happen, if we want quality milk and dairy products (that are produce from UK milk) then we will have to change the way we buy, if we do that then out farmers will get a better deal.

It's worth noting that the number of dairy farmers in Wales dropped by a third in five years (up to December 2009) and this despite repeated warnings that more needed to be done to save the industry along with the fact that our farmers are also not getting a fair price for the milk they produce, when compared to the price charged by retailers to consumers, will sadly not come as much of a surprise to most people.

There was even prior to the last Westminster General election some talk of a milk ombudsman, but it needs to be more than talk, there is a need for action, before our dairy farmers (and our farmers) are driven out of business entirely. What may follow if nothing is done may not be pretty, it may be semi industrial and serviced by cheap migrant Labour. Supermarkets as well as their bought tame politicos in the Westminster village (is that too harsh? No probably not) have to take a share of the blame for aggressively pursuing ever greater shares of the profit.

When considering the price of a pint of milk there are a few things we should all know. One litre carton of full-fat, non-organic milk can cost between 70-80p (January 2010 figures). From this a farmer will get between 21p and 28p. Production costs come in at around 28p. In the last 10 years two thirds of dairy farmers in England and Wales have gone out of business, and it has been estimated that one dairy farmer leaves the industry every day. While these may be old figures, the situation has not got any easier for the farmers or the consumers, they more than illustrate the problem facing our farmers, especially as we now have to factor in increased transport costs.

The shelf price for four pints has remained static at £1.25 for 4 pints since February 2011, and widespread promotions continue to be offered on liquid milk in May with Sainsburys and Asda offering 2 x 4 pints for £2.00 and Tesco offering 3 x 4 pints for £3.00. Supermarkets are also widely offering branded and organic milk on promotion in May.

DEFRA's annual data shows that the UK farm gate price has increased by 0.95 pence per litre (4.0%) to 24.66 pence per litre in 2010. In UK, there was a 0.22 pence per litre (0.9%) increase from the 2009 average, to 24.60 pence per litre in 2010. The average NI price stood at 19.48 pence per litre in 2009, but there was a 5.56 pence per litre (28.5%) increase in the average price in 2010, resulting in a 2010 price of 25.04 pence per litre.

The old answer to low milk prices or a surplus was to turn excess milk into other dairy products, with dairies producing other valuable products like butter, cream, cheese and yoghurt's. How many local Welsh dairies serving our urban centres that are still in business can you name? Milk aside, diary products can be big business. A 25 pence litre of milk can end up as something that sells for 15 times as much, people pay good money for ‘health yogurt’ – which with the addition of bacteria, flavouring and a marketing campaign produce healthy profits for the companies that produce them.

It is worth noting that some 40 per cent of our yogurt is made in France and Belgium, in 2009 more than 40 per cent of all Cheddar sold in the UK was actually produced outside of the UK. Its not just yogurt and cheese; it's a similar story with butter. Only one of the most popular supermarket brands [Country Life] is actually from UK milk. The bulk of our butter comes from Denmark and Ireland, and this is despite the fact that farm gate prices for milk remain consistently higher in Europe than here in the UK.

We (in the UK) when compared with 11 years ago now import nearly half our butter from abroad, cheese imports are also up, some 60 percent over the last ten years. In the UK we are importing those products that have added-value and are busy exporting the low-value milk products which are then turned into butter, yogurt, etc and sold back to us. This is madness; this is what happens in the Third World, where countries export their raw commodities cheaply and then have little choice but to buy back the manufactured products that are made from their own raw materials.

The NFU has suggested, and they should know, that the UK is in the process of losing a critical mass of milk suppliers and that we are no longer in a position where we supply the UK's “core milk requirement” which is around some 13 billion litres per year (2010 figures). In 2009 / 2010 year there was a 15 percent drop in UK Milk prices. In the last 10 years (up to 2010) the Supermarkets’ margins that is the the amount of the price they take on milk have doubled.

Now with a trend for both the processor and retailer to be the same, we have a situation where they take over three quarters of the price of a pint. We have now reached the situation where in a land renowned for Dairy farming and where even though the price of our milk is cheap, we are now become a net importer of milk.

Ironically it was a development of railway communications during the industrial revolution that provided the means to speedily deliver the farmers milk to our towns and cities and ironically as a knock on effect there was a spread of diary production. It is doubly ironic that the first supermarkets (ironically in Sainsbury’s in Covent Garden, London, in 1869) sold what was then called “railway milk” from churns. The milkman arrived next delivering direct to our doorsteps, his near demise followed some years later was a direct result of super market price-cutting which has now, more or less, effectively killed him off.

The UK Government as early as 1914 recognised that milk was important for nutrition in children, that it helped prevent rickets, and provided vitamins. And so the first government attempts to regulate milk's supply and quality came about. Pasteurization was duly brought in to kill of certain bacteria. We now have low fat milk, slimmed milk, semi skimmed milk, etc – one thing to think about is that full fat milk is only 4 percent fat, low fat milk being 2 percent (or less) and that milk is approximately 95 percent water anyway.

During the good times, pre Mrs Thatcher, the banks fell over themselves throwing credit at framers to encourage them to (as the Government and the EU wanted) to ever expand their production. Once Mrs T (and the Conservatives) who was never interested in farming anyway, being far to enamoured of dodgy money men in the City, allowed Milk quota's (effective cuts) the bad times had begun for our Dairy farmers and oddly enough the banks stopped calling with offers of cheap credit.

What can best be described as industrial milk production is not without its problems – slurry production being one of them, which can be enormously toxic and environmentally damaging. Something else to consider is that modern cows to produce large amounts of cheap milk, a While a modern Frisian may produce as much 4 times as much milk as equivalent cows did 50 years it only has three milking years in which to do it.

We, as consumers also have to take a share of the blame because we allowed all of these things to happen, if we want quality milk and dairy products (that are produce from UK milk) then we will have to change the way we buy, if we do that then out farmers will get a better deal. I won't be holding my breath for the Con Dem Government to get its act together and finally wake up and pull the fat (or the milk) out of the fire...they won't. So what are we going to do?

HOW MUCH?

When you consider the price of a pint (milk not beer), there are some things we should all be aware of. Firstly, a litre carton of full-fat, non-organic milk can cost between 70-80p of the shelf. Secondly, from this princely sum, a farmer will get between 21p and 28p. Thirdly, you can add in production costs off around 28p. Ouch! No wonder during the last 11 years some two thirds of dairy farmers in England and Wales have gone out of business, and finally it has been estimated that one dairy farmer leaves the industry every day.

Pretty grim reading, even grimmer if you are living it. Now historically the answer to low milk prices or a surplus was to turn excess milk into other dairy products, with dairies producing other valuable products like butter, cream, cheese and yoghurt's. Milk aside, diary products are big business, especially when you consider that a 25 pence litre of milk may end up as something that sells for 15 times as much. People are prepared to pay good money for ‘health yogurt’ – which with the addition of bacteria, flavouring and a marketing campaign produce pretty healthy profits for the companies that produce them.

Here's something else to think about, around 40 per cent of our yogurt is made in France and Belgium, in 2009 more than 40 per cent of all Cheddar sold in the UK was produced overseas. It’s a pretty similar story when it comes to our butter. Only one of the most popular supermarket brands [Country Life] is actually from UK sourced milk. The vast bulk of our butter comes from Denmark and Ireland, and this is despite the fact that farm gate prices for milk remain consistently higher in Europe than here in the UK.

We (in the UK) when compared with 10 years ago are now importing nearly half our butter from abroad, cheese imports are also up, around 60 percent over the last ten years. We are importing those products that have added-value and are exporting the low-value milk products which are then ironically turned back into butter, yogurt, etc and sold back to us. This is madness; this is what happens in the Third World, where countries export their raw commodities cheaply and then have little choice but to buy back the manufactured products that are made from their own raw materials. Successive UK Governments both Conservative and New Labour have sat back and allowed this to happen.

The NFU has suggested (and believe me they should know) that the UK is in the process of losing a critical mass of milk suppliers and that we are no longer in a position where we supply the UK's “core milk requirement” which is around some 13 billion litres per year. In the last year there has been a 15 percent drop in UK Milk prices. In the last 10 years the Supermarkets’ margins (that is the the amount of the price they take on milk) have doubled in ten years. Now with a trend for both the processor and retailer to be the same, we have a situation where they take over three quarters of the price of a pint. We have now reached the situation where in a land renowned for Dairy farming and where even though the price of our milk is cheap, we are now become a net importer of milk.

The development of railway communications during the industrial revolution provided the means to deliver the farmers milk to our towns and cities and ironically as a knock on effect there was an increase and greater spread of diary production. It is doubly ironic that the first supermarkets (Sainsbury’s in Covent Garden, London, in 1869) sold what was then called “railway milk” from churns. The milkman arrived next delivering direct to our doorsteps, his near demise which followed some years later was a direct result of super market price-cutting which has now, more or less, effectively killed him off.

As as early as 1914, the UK Government recognised that milk was pretty important for nutrition in children, that it helped prevent rickets, and provided vitamins. And so the first government attempts to regulate milk’s supply and quality came about. Pasteurization was duly brought in to kill of certain bacteria. We now have low fat milk, slimmed milk, semi skimmed milk, etc – it is worth remembering that full fat milk is only 4 percent fat, low fat milk being 2 percent (or less) and that milk is approximately 95 percent water anyway.

If is worth further remembering that during the good times, pre Mrs Thatcher, the banks positively fell over themselves throwing credit at framers to encourage them to (as both the UK Government and the EU wanted) to ever expand their production. Once Mrs T and the Conservatives who were never particularly interested in farming anyway, being far to enamored of dodgy loads of money men in the City, allowed Milk quota’s (effective cuts) the bad times had begun to roll for our Dairy farmers and oddly enough the banks stopped calling with offers of cheap credit.

Note as well that What can best be described as industrial milk production is (and was) not without its problems – slurry production being one of them, which can be enormously toxic and environmentally damaging. Something else to consider is that modern cows to produce large amounts of cheap milk, a While a modern Frisian may produce as much 4 times as much milk as equivalent cows did 50 years it only has three milking years in which to do it.

The talk of a milk ombudsman is welcome, but it needs to be more than talk (it will need real teeth), there is a need for action, before our dairy farmers (and our farmers) are driven out of business entirely. What may follow if nothing is done may not be very pretty, it may be semi industrial and serviced by cheap migrant Labour. Supermarkets have to take a share of the blame for aggressively pursuing ever greater shares of the profit.

Successive UK Governments (both Conservative and Labour) have also failed to take any meaningful action – this either being down to a combination of nice financial inducements from large Supermarkets and / or a general indifference to the agricultural sector. We, as consumers also have to take a share of the blame because we allowed all of these things to happen, if we want quality milk and dairy products (that are produce from UK milk) then we will have to change the way we buy, if we do that then out farmers will get a better deal. Sadly I suspect that I won't be holding my breath for the current Con Dem Government to pull the fat (or the milk) out of the fire...

STILL WAITING FOR A SUPERMARKET OMBUDSMAN?

Before the election, when every prospective politician was the farmers friend (or claimed to be at least) there was much talk from the big 3 London based parties about the need for a Supermarket Ombudsman. With potential votes in the offing all of a sudden it seemed a very good idea, especially if you were a Conservative, Liberal Democrat or Labour Party candidate, to talk up the prospects of having a Supermarket Ombudsman (with real teeth) who might be capable of protecting both the consumer, the supplier and the farmer from some of the more harsher aspects of monopolistic capitalism as practised by certain supermarkets.

Now don't get me wrong a Supermarket Ombudsman is a good idea and a measure of protection for the customer, the supplier and the farmers is a good idea that has (and is) long overdue - but it does seem to have gone awfully quiet since the election. When I was clearing my spare room I came across a hastily scribbled note from 2006 (probably in preparation for a Conference speech in 2006 / 2007) which even though we are a few years down the line should give most people some food for thought:

• The big '5' (in 2006) controlled almost 80% of the grocery sales in the UK
  

• Between 1995 and 2000 the UK lost one fifth of its local shops and local services - local post offices, local butchers, local branches of banks, grocers, etc


• The supermarkets have made and regular large donations (in cash or kind) to both New Labour, the Conservatives and other political parties.


• 54 years ago farmers received between 45 and 60% of the money that consumers spent on food.


• In 2006 it was just 7% in the UK, 3.5% int he USA and 18% in France.


• Gate prices don't make anything like a fair comparison with final Shelf price - in the UK farmers got (in 2006) something like 8 - 13% bellow the EU average gate price.

Now, if anything the situation is probably worse, there is a real clear and present danger that the Political parties have readily got used to some of the perks of having a close relationship with the Supermarkets, Power Companies, etc - with their glossy adverts in conference brochures, free food at funded functions, glossy paid adverts in conference brochures, etc. One very old rule is that once you sell your virtue it stays sold, and once you sell your principles they stay bought and the end result is that the fabric of our democracy is damaged or tainted.

A good and pertinent question to ask would be what do they (the Supermarkets) get for their money? or at least what are they seeking in lieu of their donations? The answer may well be a weak and watered down Supermarket Ombudsman - which is the last thing any of us needs, whether as a customer, a supplier or a farmer. Another question that needs to be asked is whatever did happen to that much vaunted pre-election idea of a Supermarket Ombudsman?

So far, not a lot...

THE PRICE OF A PINT?

When considering the price of a pint, and I am talking milk here, there are a few things we should all know. One litre carton of full-fat, non-organic milk can cost between 70-80p. From this a farmer will get between 21p and 28p. Production costs come in at around 28p. In the last 10 years two thirds of dairy farmers in England and Wales have gone out of business, and it has been estimated that one dairy farmer leaves the industry every day.

Historically the answer to low milk prices or a surplus was to turn excess milk into other dairy products, with dairies producing other valuable products like butter, cream, cheese and yoghurt's. Milk aside, diary products are big business. A 25 pence litre of milk may end up as something that sells for 15 times as much, people pay good money for ‘health yogurt’ – which with the addition of bacteria, flavouring and a marketing campaign produce healthy profits for the companies that produce them.

Some 40 per cent of our yogurt is made in France and Belgium, in 2009 more than 40 per cent of all Cheddar sold in the UK was produced abroad. It’s not just yogurt and cheese; it’s a similar story with butter. Only one of the most popular supermarket brands [Country Life] is actually from UK milk. The bulk of our butter comes from Denmark and Ireland, and this is despite tha fact that farm gate prices for milk remain consistently higher in Europe than here in the UK.

We (in the UK) when compared with 10 years ago now import nearly half our butter from abroad, cheese imports are also up, some 60 percent over the last ten years. In the UK we are importing those products that have added-value and are export the low-value milk products which are then turned into butter, yogurt, etc and sold back to us. This is madness; this is what happens in the Third World, where countries export their raw commodities cheaply and then have little choice but to buy back the manufactured products that are made from their own raw materials.

The NFU has suggested, and they should know, that the UK is in the process of losing a critical mass of milk suppliers and that we are no longer in a position where we supply the UK's “core milk requirement” which is around some 13 billion litres per year. In the last year there has been a 15 percent drop in UK Milk prices. In the last 10 years the Supermarkets’ margins (that is the the amount of the price they take on milk) have doubled in ten years. Now with a trend for both the processor and retailer to be the same, we have a situation where they take over three quarters of the price of a pint. We have now reached the situation where in a land renowned for Dairy farming and where even though the price of our milk is cheap, we are now become a net importer of milk.

Ironically it was a development of railway communications during the industrial revolution that provided the means to deliver the farmers milk to our towns and cities and ironically as a knock on effect there was a spread of diary production. It is doubly ironic that the first supermarkets (Sainsbury’s in Covent Garden, London, in 1869) sold what was then called “railway milk” from churns. The milkman arrived next delivering direct to our doorsteps, his near demise followed some years later was a direct result of super market price-cutting which has now, more or less, effectively killed him off.

The UK Government as early as 1914 recognised that milk was important for nutrition in children, that it helped prevent rickets, and provided vitamins. And so the first government attempts to regulate milk’s supply and quality came about. Pasteurization was duly brought in to kill of certain bacteria. We now have low fat milk, slimmed milk, semi skimmed milk, etc – one thing to think about is that full fat milk is only 4 percent fat, low fat milk being 2 percent (or less) and that milk is approximately 95 percent water anyway.

During the good times, pre Mrs Thatcher, the banks fell over themselves throwing credit at framers to encourage them to (as the Government and the EU wanted) to ever expand their production. Once Mrs T (and the Conservatives) who was never interested in farming anyway, being far to enamored of dodgy money men in the City, allowed Milk quota’s (effective cuts) the bad times had begun for our Dairy farmers and oddly enough the banks stopped calling with offers of cheap credit.

What can best be described as industrial milk production is not without its problems – slurry production being one of them, which can be enormously toxic and environmentally damaging. Something else to consider is that modern cows to produce large amounts of cheap milk, a While a modern Frisian may produce as much 4 times as much milk as equivalent cows did 50 years it only has three milking years in which to do it.

The talk of a milk ombudsman is welcome, but it needs to be more than talk, there is a need for action, before our dairy farmers (and our farmers) are driven out of business entirely. What may follow if nothing is done may not be pretty, it may be semi industrial and serviced by cheap migrant Labour. Supermarkets have to take a share of the blame for aggressively pursuing ever greater shares of the profit.

Successive UK Governments (both Conservative and Labour) also failed to take any meaningful action – this either being down to a combination of nice financial inducements from large Supermarkets and / or a general indifference to the agricultural sector. We, as consumers also have to take a share of the blame because we allowed all of these things to happen, if we want quality milk and dairy products (that are produce from UK milk) then we will have to change the way we buy, if we do that then out farmers will get a better deal.

A SUPERMAKET OMBUDSMAN?

All of a sudden it seems a good idea (if you the Conservative or Labour Party) to have a Supermarket Ombudsman which might protect both the consumer, the supplier and the farmer from some of the more harsher aspects of monopolistic capitalism as practised by certain supermarkets.

Now don't get me wrong a Supermarket Ombudsman is a good idea and a measure of protection for the customer, the supplier and the farmers is a good idea that's Long overdue. Whilst clearing my spare room I came across a hastily scribbled note from 2006 (probably in preparation for a Conference speech in 2006 / 2007) even a few years down the line it makes interesting reading.

• The big '5' (in 2006) controlled almost 80% of the grocery sales in the UK
• Between 1995 and 2000 the UK lost one fifth of its local shops and local services - local post offices, local butchers, local branches of banks, grocers, etc
• The supermarkets have made and regular large donations (in cash or kind) to both New Labour, the Conservatives and other political parties.
• 54 years ago farmers received between 45 and 60% of the money that consumers spent on food.
• In 2006 it was just 7% in the UK, 3.5% int he USA and 18% in France.
• Gate prices don't make anything like a fair comparison with final Shelf price - in the UK farmers got (in 2006) something like 8 - 13% bellow the EU average gate price.
  

The real danger is once the Political parties get used to the perks of a close relationship with the Supermarkets, Power Companies, etc with their glossy adverts in conference brochures, free food at funded functions, etc is that they stay bought and democracy is damaged.

A good question to ask would be what do they get for their money? or what are they seeking for their donations? The answer may well be a weak and watered down Supermarket Ombudsman - which is the last any of us needs, whether as a customer, a supplier or a farmer.