Two more major dairy players have announced plans to cut farm gate milk prices. After Robert Wiseman Dairies and Dairy Crest made the decision to slash milk prices over the past week, Arla and Muller have announced identical cuts to their suppliers.

All companies have slashed two pence per litre from their farm gate prices. The copycat behaviour, which the companies claimed is due to unavoidable pressures on their businesses and tight market conditions, has provoked a barrage of condemnation from farming unions.

Price cuts by the processing giants come against a backdrop of rising input costs, which are cutting into farmers’ already thin margins and jeopardising their long-term viability. With feed prices having risen 17 per cent and fuel prices up ten per cent on last year, dairy consultancy the Dairy Group announced this week that “Production costs mean the room for farm gate prices to fall back is limited without serious consequences for UK dairy farmers.”

UK producers have only just attained 13th position in the EU milk price league table, despite milk recently attracting premium retail prices, from which farmers have, in many cases, yet to see benefits. Previously, the UK had been occupied 23rd position – fourth from bottom – where producers found themselves languishing last year.

In response to the corporates’ announcements, the NFU has claimed that “something is fundamentally wrong with the dairy market.”

NFU dairy board chairman Mansel Raymond stated, “Dairy farming is fundamentally a long term exercise. Investment, breeding, skills and a range of other elements allow farmers to improve their businesses to meet market demands, reduce their environmental impact and generally strive to fulfil the requirements of a growing population with dairy at the heart of its diet. It is therefore catastrophic that short- termism further up the supply chain has led to cuts which mean a typical farmer will lose out on around £20,000 per year.

“These buyers claim to be building long-term relationships with suppliers and customers and demand specific standards to match. Yet when an opportunity to cut farmers’ milk prices presents itself, it seems this all means nothing. Milk buyers transferring losses, accrued as a result of their own business strategies, to farmers whose businesses are already struggling is totally unsustainable.

“This raft of milk price cuts exposes the fundamental problems in milk contracts. As long as milk processors can get away with this atrocious behaviour, it seems they will do so.”

The union is pushing for contracts with clearer terms, especially on price, and farmers increasingly want to see contacts taking production costs into account, as these are set to become more volatile. Mr Raymond concluded, “The status quo where buyers can change the deal and cut prices without consequence is fundamentally wrong and must change.”

In France, producers have begun forming strong cooperatives to increase their influence in the face of large corporations. Agriculturalists have suggested that collectivisation is one means of enabling farmers to stand up to processors and retailers who currently hold sway over the supply chain and continue to profit at the expense of farmers further down the supply chain. European farmers’ union Copa Cogeca has named 2012 ‘year of the cooperative.”

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