Following a meeting between farming unions and protest group Farmers for Action today, industry representatives have called for the immediate reversal of milk price cuts imposed on farmers since April.

A number of major processors cut milk prices by 2 pence per litre between April and May and a further four, Robert Wiseman, Arla, Dairy Crest and First Milk, announced a second round of cuts ranging between 1.5 ppl and 2ppl this week. The cuts have lowered farm-gate milk prices to around 5 ppl below the cost of production.

In response, the farming industry and its representatives have called for immediate action. This morning’s meeting saw members of a number of unions and groups come together in “an industry show of strength after a catastrophic three months for the sector,” according to the NFU, which chaired the meeting.

The groups have called on farmers to show solidarity by turning out in force at a crisis summit in London on Wednesday (11th July) “Leaving retailers, MPs, processors and the public in no doubt about the scale of the problem.”

The groups said they hope to create the opportunity for moves towards a more sustainable dairy chain; they said retailers working with processors must take responsibility for creating a sustainable supply chain which returns at least a cost of production for dairy farmers. There have been calls for government intervention and for the introduction of a code of practice to govern the supply chain, such as is in place in the groceries sector.

The organisations released a joint statement in which they said, “We are united in our demand for an immediate reversal of recent and planned cuts. There has been an unprecedented outcry of anger and frustration among farmers. We want to harness that strength of feeling and bring together farmers from across England, Scotland and Wales to express their feelings in London next week.

“Farmers have told us they will do whatever it takes to stand up against these cuts – Wednesday’s summit gives us that chance. There is a window of opportunity between now and August 1 to progress a robust voluntary code of practice, however, we will also be exploring a regulatory solution from government.”

FFA proposes action, DEFRA proposes talks

Protest group Farmers for Action announced on its website today that if processors and retailers do not heed today’s calls, they will begin a campaign of direct action to disrupt milk supplies. The group announced on its website, “They [retailers] have until 1 August 2012 to confirm that this will be done, if not they will need to notify their retail customers that milk distribution will be seriously disrupted.”

The group levelled stiff criticism at supermarkets Asda and Tesco earlier in the week over price war tactics. FFA accused the supermarkets of “Cost-cutting in the store and devaluing the product, which is having a knock on effect right the way down the supply chain.”

Processors blamed “tough market conditions” for cream the price cuts this week. However, farming groups have accused both retailers and processors of creating a ‘race to the bottom’ on milk prices, which means they are overly reliant on secondary items such as butter, cream and cheese to recoup profits. They also claim farmers, at the bottom of the supply chain, are forced to pay the price for the cavalier antics of those further up.  

On Tuesday, Dairy Crest suppliers Dairy Crest Direct posted a ‘profit warning.’ The group said its 650 farmers who will suffer as a result of the cuts stand to lose £53,000 per farm, per year. DCD said the latest price cut will cost Dairy Crest’s farmer suppliers a total loss of £35 million each year.

Answering questions in parliament today, Agriculture Minister Jim Paice sent mixed messages about his position on the growing crisis. Although he said he is prepared to "bang heads together" in order to secure an agreement between the industry and processors, he ended rather ineffectually, stating "ministers can't set prices." He said that, for the government to step in and take control of the dysfunctional dairy chain, DEFRA would need EU approval.

However, the minister did say that he is seeking to broker a compromise over notice periods in current contracts, which are one of the most contentious and, farmers feel, unequal aspects of the relationship between processors and their suppliers. At present, although many farmers would have to give 12 months’ notice in order to terminate a contract, processors are obliged to give only 24 hours notice of a change in price.

The minister agreed to hold an emergency dairy summit with farming representatives to discuss the situation.

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