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.

THE PRICE OF A PINT (PART 1)

Having successfully avoided the need for any panic (or precautionary) buying during the brief flurry of snow last week I had no need to rush out and try and buy sixteen pints of UHT milk and half a dozen loaves of bread and had no need to fight someone in the supermarket for the last broken bag of sprouts. That aside, but with milk on my mind I wondered why successive UK Governments have failed to take any meaningful action to help our dairy farmers (or any of our farmers for that matter).

I suspect that this is down to a combination of nice financial inducements from large Supermarkets and a more marked indifference to the agricultural sector. As consumers we also need to take a share of the blame because we allowed all of these things to happen. If we want quality milk and dairy products (actually produced from UK milk or even 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 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 despite repeated warnings that more needed to be done to save the industry. Our farmers have consistently not received a fair price for the milk they produce, which when compared to the price charged by retailers to consumers, which will sadly not come as much of a surprise to most people.

Before our farmers, dairy or otherwise, are driven out of business entirely then need action not words. If our governments at all levels do nothing then the future for agriculture may be grim, semi industrial and serviced by cheap migrant workers. Industrial milk production has been much trumpeted as the saviour of the dairy industry (and a number of important planning applications are in the pipeline) 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. What this all means is that we in Wales miss out, as Dairy products are potentially big business as some of our more successful organic producers can prove.

The development of railway communications during the industrial revolution provided s means for rapid delivery of farmers milk to towns and cities and lead to a growth of diary production. The first of the supermarkets (Sainsbury’s in Covent Garden, London, in 1869) sold “railway milk” from churns.

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 (gate price) pence 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. Only one of the most popular supermarket brands [Country Life] is actually made 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 eleven years ago now import almost half of our butter from abroad, cheese imports are also up, some 60 percent over the last eleven years. 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 total 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.