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Potter's View: Milk market failing to function normally

Insights

Despite the recent price hikes, the milk market still fails to function in any normally predictable fashion, as Ian Potter tells us.

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Milk prices are creeping up at last! Triggered by Milk Link and Tesco, others are now starting to follow. However, how much damage the intransigence of the liquid buyers over the last year will have done to the morale of farmers remains to be seen.

 

Meanwhile, Dairy UK continues to wind up producers with comments which undermine their reputation and severely hamper their efforts to forge links across the industry. They claim to be the “Voice of the Industry”. No way.

 

Following a recent Dairy UK board delegation meeting with Defra minister Jim Paice, it was reported Dairy UK argued the UK dairy market is functioning ‘normally’. Normally? Dairy Zimbabwe might claim that, but no one here will swallow that claptrap.

 

Only someone totally ignorant of the market, or an utter fantasist, could make such a claim. World dairy markets have bounced upwards in 2010 and early 2011, but this has not resulted in a fair percentage of the gains flowing into farmers’ pockets.

 

But you can bet your life the moment commodity prices dip, some liquid processors will execute a price drop to plug gaping holes in their profits. There is minimal transparency in today’s liquid milk pricing, and improved producer returns have been extremely slow in coming.

 

Northern Ireland Co-op United Dairy Farmers paid a base price of 25.75ppl for December deliveries and its producer February base milk price is expected to be close to 28ppl. If commodity prices fall, so will its price. Now that’s a functioning market, but on the UK mainland farmers have been insulated from such gains. We were officially at the bottom of the Dutch 2010 LTO 12 month European price table - below even Southern Ireland! And we’re supposed to have the best milk market in Europe! Working normally? Pah!

 

The price war in supermarkets this autumn shows the obsession with the liquid markets will limit the industry in the UK. Far from being the ‘cherished market to supply’, it has been a liability.

 

If we aspire to become a significant dairy producing nation, post 2015, we clearly need to be in quality commodity processing.

 

Commodity is not a dirty word and it’s not the second class market it was once seen as. It will suit some farmers to ditch producing to a level profile, cut costs and focus on margin, and not what his aligned neighbour gets from Tesco or M&S.

 

Many are questioning whether dedicated producer groups have run their course, having set farmer against farmer with the “haves” and the “have nots”. On the one hand, the NFU continue their love-in with supermarket contracts, whilst others believe they are a one-way ticket to hell where the retailer determines the price paid to producers, but which then has a direct and negative effect on the others, that is the have nots.

 

Slowly but surely, questions are being asked by grassroots farmers of those who represent their interests in negotiations. More and more voices are complaining about their teams’ abject failure.

 

For most of them, their representatives were initially enthusiastic farmers keen to do their best. But that’s changed. They are now bogged down with politics, loyalties and conflicts and it’s evident to some their roles are more about money, positions and maintaining the status quo.

 

They don’t want to rock the boat. Something has to change.

 

Now onto Knockton Dairies (yes, I know it’s Nocton, but this spelling suits it better).

 

When ‘expert’ reports land in my inbox a significant number are deleted without reading. However, the recent Foresight report on the

Future of Food and Farming grabbed my attention in its suggestions to ensure a world population rising to over 9bn can be fed ‘sustainably and equitably’. It made me ask what role does dairy farming play?

 

There has been an “unprec-edented” public response to the Knockton proposal with a staggering 14,000 direct objections and petitions and over 70,000 signatures. The petitions claim the farm will be cruel and it will force other dairy farmers out of business. Both cobblers.

 

While the local council and consultees will be clear about their roles in weighing up the application on its merits and the risks it poses, they will be acutely aware of the public pressure and scrutiny they will collectively and personally face. The temptation to be overly cautious and risk-averse must be extremely high - no one can be immune from that kind of exposure. At the moment I can’t see planning permission being granted, unfortunately.

 

The hoops the Knockton duo are having to jump through are way beyond those previously experienced by any other dairy farmer. They stuck their heads above the parapet with an ambitious plan that, on the face of it, could address many of the aims of the Foresight report. But in return they’ve had them shot off by people, most of whom have limited or no knowledge of dairy farming, nor who have any desire to know.

 

For this reason I urge industry leaders to support Knockton, and to make it known there must be fair treatment of such applications, regardless of the weight of misinformed public opinion. Such proposals must be weighed up on their own merits and with a can-do approach. If the proposal fails because it hasn’t had a fair hearing, then we have to ask where this leaves the dairy industry and UK agriculture for addressing the challenges of the future.

 

But it’s not about one super dairy. It goes much deeper, into areas like bTB and GM. It is about the industry, and about the numerous organisations who claim to represent you all taking a firm stance on its future direction, rather than hiding in case they offend someone.

 

We have to educate the public to accept technological advances in agriculture and if we don’t do it others will step forward to do it for us and potentially damage our future competitiveness. For me the treatment of the Knockton case is pivotal for future advancement.

 

Finally, Happy Birthday to me! On February 7, 25 years ago, I placed my first quota advert in Farming News, which started my quota business. The advert is framed in our office reception and was next to an Abertay paper sacks advert. Abertay and its girls have long gone, but not their mug coasters which I still use daily to brighten up my desk.

 

I bet some wish the Abertay girls had stayed and I had gone!

Ian Potter

Ian is a specialist milk quota and entitlement broker.

Comments please toianpotter@ipaquotas.co.uk

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