Elaine Watson
A supermarket price regulator, along the lines of Ofwat or Oftel, could be the only means of ensuring farmers receive a sustainable price for milk, according to a new study into the milk supply chain.
The report, commissioned from KPMG by the Milk Development Council, claims the balance of power in the milk industry needs to be tackled as a "matter of urgency".
It also puts paid to claims that processors, rather than retailers, are making good margins on milk, said MDC chairman Brian Peacock. "Processors are definitely not making excessive profits, and even retailers are not making a lot. Farmers, meanwhile, are making virtually ­ and in many cases literally ­ nothing, on milk. Basically, it's just too cheap."
In real terms, milk prices have fallen by 25% since 1995, an unsustainable drop, he added.
Although perennial issues such as seasonality in production and processing overcapacity needed to be tackled, he said, a regulator similar to those monitoring electricity, gas or telecoms could be the answer, as any concerted price action from the industry would be seen as anti-competitive. "Either this or a strengthening of the code of practice," said Peacock.
And vertical integration ­ whereby farmers took some control over the supply chain by getting into processing ­ was still a good idea, he added.

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