The precarious state of the milk market and the extraordinary power of the supermarkets dominated the main seminar at AgriScot yesterday.

NFU Scotland president Jim McLaren and Rural Affairs Cabinet Secretary Richard Lochhead shared the platform and essentially there was very little between them. Both saw a market for liquid milk that was out of balance and dysfunctional. As far as Mr Lochhead was concerned part of the answer was for an effective ombudsman or market adjudicator. “Someone with teeth,” he said. “It is time to up the ante. What is going on in terms of a retail price war over milk is appalling.

“I want to see dairy farmers in a position where they can invest in their businesses. The more direct support we give to dairy farmers, the more the multiple retailers laugh up their sleeves as they simply collect the money to add to their margins.”

Mr Lochhead will have a chance to put his points to a high-level Scottish dairy summit today in Edinburgh but to date of the major supermarkets only Morrisons has said it will attend.

Direct action by producers is something which NFU Scotland normally stands back from but Mr McLaren warned that the major retailers might find themselves targeted as soon as mid December if there is no improvement in farm-gate prices.

He reckoned that rising input prices, including feed and fertiliser, would add 2p a litre to production costs in coming weeks and this at a time when most dairy farmers were already operating at a loss.

“The supply chain is brutal and in as bad a way as it has ever been. Volume of milk is dropping rapidly but so is the price. If the markets were working properly the price would be going up.”

He ruled out a return to anything like the milk marketing boards of old but agreed with Mr Lochhead about the need for a retail adjudicator. “But it has be someone who is proactive, brave and above all someone who will find remedies rather than just pointing out problems.”

Mr Lochhead was speaking ahead of the Scottish Government’s budget statement but said he did not expect to escape the cuts with capital expenditure likely to be cut by 36% across the board. “There will be tough choices to be made and partner bodies will take their share of the cuts.” These might well include organisations such as Scottish Natural Heritage and Scottish Environment Protection Agency.

Mr Lochhead said the Scottish Rural Development Programme would inevitably be affected but, as a priority, he wanted to secure the Less Favoured Area Support Scheme budget. As regards the SRDP, he said the cuts were likely to affect future funding which would no longer be available rather than projects which were already approved or under way.

Mr Lochhead also announced that he was to set up a working group to look specifically at the structure and delivery of Top Up Funds (TUF) as proposed in the Pack Inquiry. Brian Pack, or “the man himself” as Mr Lochhead styled him, would be an adviser to the group.