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From the editor: Broken milk market leaves dairy farmers badly exposed

It is five years since Muller Wiseman’s then chief executive Ronald Kers told Farmers Guardian it would be the number one UK processor.

The interview was the sort that does not come along too often for business journalists, given the often guarded nature of people in the commercial world.

 

Yet his bullishness shone through as he positioned the firm to go toe to toe with Arla.

 

Now, just over half a decade later, the fundamentals seem to have changed for Muller as it lags behind Arla on milk price, with an axe taken to its Scottish milk field in a restructuring move some commentators feared could have been even worse.

 

What has not changed for scores of dairy farmers across the UK is the knife edge upon which the sector resides.

 

As shown by the recent plight of Tomlinsons in North Wales, farmers who invested for the future were hung out to dry by the firm’s collapse.

 

Ironically, many of those on Sainsbury’s contracts via Tomlinsons are now seeing their milk picked up by Muller.


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There is also a geographical shift at play in dairy and, for those in remote areas away from the major distribution hubs of a consolidated processing sector, the future looks increasingly uncertain.

 

Whether it is the farmers who supplied the Campbeltown Creamery in western Scotland, those farms north of Aberdeen dropped by Muller, or the North Wales Tomlinsons producers left scrabbling for a buyer, the old certainties of a milk tanker coming down the drive have disappeared.

 

But, much like the red meat sector and the current beef price collapse, what the dairy sector’s ills expose is a food chain predicated on wafer thin margins as retailers squeeze processors, who then leave farmers exposed if there is any shift in the market.

 

If beef’s challenge is to drive a premium in to its products when much of it now goes for mince, dairy’s obstacle to overcome is the precarious position a reliance on liquid milk leaves it in.

 

However, while a brand-led milk market in which processors and producers effectively communicate might be the dream, this autumn has simply become another nightmare for the sector.

 

And finally - the CLA’s ’Rural Powerhouse’ campaign must be welcomed. Farming must, and often does, see itself as integral to the rural economy. Hopefully this will resonate with Government as well.

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