Chief executives at the UK’s largest dairy companies told the Commons environment, food and rural affairs committee on Monday that unfavourable exchange rates and oversupply largely dictated how much farmers were paid, not retailers or processors.
Moreover, unless the “institutionalised antagonism” between the sectors of the industry was overcome, prices could dip further, they said.
Dairy Crest chief executive Drummond Hall said there was much the industry could do to improve farmgate economics, such as smoothing out seasonal peaks and troughs in production to meet demand, driving efficiency, benchmarking and adding more value.
However, progress was unlikely unless the industry was able to “move beyond the current blame culture and work on a genuinely collective basis.”
A regulator was “certainly not the solution,” he added.
Rival dairy processors also denied profiteering. Despite fluctuations in the price of milk over the last decade, Robert Wiseman Dairies and Arla both claimed their net margins had remained virtually unchanged in the last six years.
Arla chief executive Neil Davidson said poor farmgate prices for milk were largely the result of the “fault line” in the
Common Agricultural Policy that had failed to protect UK farmers against currency fluctuation.
Safeway director of communications Kevin Hawkins warned that farmgate milk prices could fall another 3-4p a litre in the next few years following the introduction of a single farm payment under CAP.
This could cause further antagonism in the supply chain and pile pressure on processors and retailers to relieve farmers’ pain, he said.
Reversing the decline in milk consumption was probably impossible given changing lifestyles, he added, but actively marketing the low fat credentials of milk was a step in the right direction.
The British Retail Consortium also warned that the impact of CAP reform would be “painful and disruptive”. Director of food policy Richard Ali said: “It is essential that the leaders of the industry should use the next 12 months to develop an agreed view of the likely impact of CAP reform, a broad strategy for dealing with it and a plan for communicating the implications to all those farmers who will be on the receiving end.”