NFU Scotland believes the savage milk price cuts and contractual changes imposed on Scottish dairy farmers in recent days is a stark reminder to politicians of the urgent need to secure a robust code of practice for the dairy sector.
Milk processor, Dairy Crest, led recent price cuts in the milk sector last week. It imposed a 2p per litre cut on almost 600 of its dairy farmer suppliers at 4 days notice.
That was followed by the disappointing announcement this week, that Scottish-based milk processor Robert Wiseman Dairies was to impose a similar cut on many of its farmer suppliers from June, blaming weak cream prices. NFU Scotland is also aware that the Fresh Milk Company, the procurement arm of Lactalis McLelland (parent company of the Stranraer-based Caledonian Cheese) has also changed its milk pricing arrangements at short notice, going back on a previous agreement with its direct suppliers.
NFU Scotland vice-president Allan Bowie said: “The clear and ongoing imbalance of power within the dairy supply chain is clearly working against a sustainable dairy sector – not just in Scotland but across much of the UK.
“The ability of processors to impose severe price cuts or changes to contractual agreements with little negotiation and with impunity is an unacceptable situation.
“Dairy farming businesses need to be resilient, but for those who face a 2p per litre cut in their price, this equates to more than £20k a year reduction in the income for an average dairy producer at a time when costs are still soaring.
“NFU Scotland has also been made aware of changes to milk pricing arrangements for those supplying milk via the Fresh Milk Company to Caledonian Cheese that go back on a previous agreement with its milk suppliers. That change further underlines the one-sided nature of the dairy sector that allows cuts and contractual changes to be imposed without agreement and at very short notice.
“The UK dairy sector, due to a combination of the power of retailers and processors and the lack of significant export options, has consistently left producers vulnerable and exposed as the weakest link in the chain.
“There is cause for long-term optimism in dairy – as seen in DairyCo’s most recent intentions survey but such swingeing changes to price and terms will have a serious impact on the confidence and resilience of dairy farmers short-term.”