Arla chief executive Peder Tuborgh has warned the UK faces a shortage of butter and cream at Christmas as prices continue to soar.
Urgent action is needed to change the boom and bust nature of the dairy market amid warnings from processors of a butter and cream shortage this Christmas.
The industry hit the national news headlines this week after Arla chief executive Peder Tuborgh told the BBC butter prices would increase by Christmas, as wholesale prices for cream and butter continued to soar, with some stores already ‘rationing’ supplies.
It came as farmer confidence hit an ‘all-time low’ following mixed messages from some processors who warned of an oversupply earlier in the year.
Industry chiefs said the sector required action to remove farmers from the current volatility, with the unions calling for the industry to come together to create ‘new mechanisms’ to help farmers plan their production.
NFU dairy board chairman and Arla farmer Michael Oakes said he was not surprised by the warning and other processors would also be worried about shortages.
“They did not get the spring rush they were expecting. When prices dipped earlier in the year it affected farmer confidence,” he said.
“To get a sustainable, long-term milk supply we need a sustainable long-term milk price.”
Gary Mitchell, NFU Scotland vice-president, called for a complete culture change to the ‘almost feudal’ current system.
“Dairy farmers are weary of the simple lack of fairness, respect and collaboration to manage the key challenges of volatility and wafer-thin or non-existent margins,” he said.
“In a country so exceptionally well placed to produce milk it is shameful the dairy supply chain and Government cannot develop constructive solutions, beyond farmers taking the hit every time the going gets tough.”
Both unions agreed controlling production through pricing alone was too ‘reactive’ and often came too late to incentivise changes at the right time.
They called on Government to act on ‘the need for better market information’ to rebuild trust and allow farmers to plan their production better going forward.
Mr Mitchell added the solution was long-term planning across the supply chain.
He said: “The fundamental key is to build trust, introduce much better contracts, pricing and volume transparency, longer term planning across the supply chain and no mixed messages, where processors drop prices unilaterally when they fear they will have too much milk and then cry out for more.”