The liquid milk market is broken and the whole supply chain is no longer sustainable, believes NFU Dairy board chairman Michael Oakes.
Speaking at the NFU Conference, Birmingham, he said the Arla liquid business and Muller were both massively invested but losing money, and the processors were not getting the value for the core product from the retailers.
“We have ended up with a pretty dysfunctional liquid market and if something does not change these guys will not keep supplying that market,” he warned.
“We have seen Sainsbury’s catch a cold and have had to step back and re-assess their relationship with the processor and the price they are paying.
“Because the primary producers have been in such a weak position, processors have been able to fill their factories by taking business off each other, but I think now even they know they have gone too far and left themselves no margin.”
He said that for producers to get a better deal then ‘buyer’s discretion’ would have to come out of contracts and that he was hoping to get the whole subject before the EFRA select committee for them to investigate.
He explained that the demise of CAP could be one of the ‘levers’ to use in putting the argument to Government and persuading them to work with the industry and consider helping support it as it adjusts to the post-Brexit era.
“If Government is taking that direct support away perhaps there is an opportunity for them to help us access new markets which will give industry the confidence to invest,” said Mr Oakes.
“But we have got to do a much better job of talking to the Treasury about what we put into the rural economy and paint a better picture of what the rural economy would look like without dairy farmers in it, and while we may not make a lot of money we do turn over a lot of money.
“While we do not necessarily want handouts, I am confident we have a really good argument here and we have just got to do a bit of work to make sure what we say is right.”