MILK PROCESSORS should immediately pass a fair share of their higher market returns back to producers.
Throwing down the gauntlet to milk buyers, NFU Scotland said that, after two years of decline, market indicators were finally starting to move upwards, and there was no excuse for not increasing prices at the farmgate.
First Milk has already bitten the bullet on prices, and confirmed that it will increase its July A prices by 0.5p per litre, and B prices by 2ppl.
The co-op’s Clive Sharpe said: “Whilst I am sure these price increases will be welcome, we also recognise that the market and milk prices still have a long way to go before they get to sustainable levels.
“In the last few weeks we have started to see a firming of the market, and given that the majority of our income is linked to basket price mechanisms, that market positivity bodes well the future.”
Dairy Crest is reversing the previously announced reduction to its price from July 1, resulting in the Davidstow core price remaining at 21.72p per litre until the end of August.
For Scottish suppliers to Arla, the union was confident that its next announcement should be positive. Grahams The Family Dairy is understood to be writing to its suppliers shortly regarding prices, while Muller has opted to hold its milk price. The union said that it had still to hear about any milk price changes for farmers supplying Lactalis.
Contacted by The Scottish Farmer, Rory Christie, chairman of the Milk Suppliers Association which supply Lactalis, said: “We are still in negotiations but we are looking at a 1p rise for both August and September.”
But John Watson, one of Mr Christie’s members and Scottish spokesman for Farmers For Action, was far from happy with Lactalis: “This 1p in Aug and 1p in September is an insult. Producers won’t see any benefit until they get their milk cheque in October. The increase should have been 2p from July 1," said Mr Watson.
“The Lactalis management under the current chief executive Mark Taylor is failing farmers. It has just lost a 7000 tonne cheese order to Iceland and has been de-listed by Tesco. If it doesn’t put money into producers pockets now it could lose half its milk field.
“There are also growing fears that we are running out of milk and there could be very little cheese made in the UK by the end of the year," claimed Mr Watson. "Cows are being fed but to no degree, the expected spring flush didn’t come, and wet weather south of the Border is hitting production.”
Asked why Muller hadn’t made a move yet, a spokesman said: "We are paying a competitive standard non aligned milk price, notwithstanding the additional retailer supplement for non aligned producers which is currently in the region of 3p per litre.
“It is also important to stress that our price is paid on all litres, and is not subject to A and B pricing mechanisms of the kind introduced by other milk buyers. We are currently monitoring the market situation.”
Graham’s The Family Dairy, meanwhile, were unavailable for comment.
Industry analyst Ian Potter said: “Prices have bottomed and are on the up. But a word of caution. In the space of weeks, SMP intervention storage has gone up from 109,000 tonnes and the 300,000 tonnes of product instore will have to come out and be sold, which will hamper any recovery. It’s a huge tonnage and a big black cloud.”
According to analysis by NFUS and others, production to June was down 2,600,000 litres a day compared to June 2015 and daily production is now below the three-year average. Union milk committee chairman Graeme Kilpatrick said: “Although there is long way to go, the market is clearly turning. That means all milk buyers and processors will not only be judged by how they have treated their suppliers throughout this crisis, but also how quickly they react now.
“Spot markets are as high as 25p per litre, so producers should be challenging their milk buyer if milk price increases are not being passed on," he advised. "Currency changes alone are worth 1.3p per litre today and the way the market is moving means that every farmer should be getting 19p per litre or at least the AMPE price of 18.9p by August.
“Given what dairy farmers have endured in the past two years, it would be a slap in the face for them if any milk buyer used rising markets at this time as an opportunity to grow their own margin when almost all producers are still operating at a loss."