Suppliers of milk to the supermarkets are keeping up the pressure on their customers as they strive to increase returns.
Dairy UK, the body representing farmers and processors, has outlined in a letter to the multiples the escalating cost burden being encountered by its members.
In the letter, chairman Sir Don Curry said: “Significant cost pressures have recently affected all elements of the dairy industry supply chain. These cost increases represent a considerable challenge to the industry’s profitability and its longer-term viability.”
Dairy UK told customers that since the spring of last year, dairy processors’ energy costs had risen by 33%, transport costs
had risen by 5% over the last year and wage costs had risen 4%. For liquid processors, the cost of plastic for packaging had risen 48% in a year.
Defra’s survey of agricultural earnings showed that wage costs had risen by 14.8% in the
past two years. Cost increases in other areas mean that the total operating costs for an average dairy farm have risen by 9% over two years.
Sir Don said: “Cumulatively the cost increases incurred by dairy farmers and processors are having a significant impact on individual businesses.”
The letter was sent to the industry’s top 50 customers in retail, wholesaling, foodservice and food processing.
Meanwhile, the NFU released a document outlining its justification for milk price increases. The document, British Milk, What Price?, claimed that without improved returns for producers, milk production was hanging in the balance.
The document said a boost in milk prices was needed to cover the significant increases in on-farm overheads during the past two years, especially in relation to labour, fuel, fertiliser and feed.
The impact of CAP reform, the need for stable milk supply and market forces were also cited to support the argument.
Richard Clarke