FG dairy campaign enters its second phase

ALMOST 12 months since the launch of our ‘Fair Trade for British Dairy Farmers’ campaign, considerable progress has been made.

Aiming to build on this initial success, we are now handing over copies of our 10,000 signature-strong petition to retailers, processors and the food service sector to maintain the pressure for a fairer deal for the British dairy industry.

A success story

Shortly after the launch of the NFU’s Dairy Survival Plan and immediately following the collapse of the co-operative Dairy Farmers of Britain, Farmers Guardian joined the NFU and six other industry organisations in calling for: Commitment to sourcing British; Dedication in cheese; and Promotion of the Red Tractor.

Backed by the amazing dedication of our readers, many of whom collected signatures for us, we launched our Fair Trade for British Dairy Farmers petition and have amassed just under 10,000 signatures.

The petition provided added pressure to the work the industry was doing to keep the issue at the forefront of buyers’ and other decision makers’ minds. And as Gwyn Jones stepped down as NFU Dairy Board chairman last month, he reeled off a number of significant wins, he and the rest of the industry could be proud of. Most notably:

• Morrisons began rolling out use of the Red Tractor label on all of its 113 own-label cheese lines
• Marks & Spencer and Waitrose made a commitment to source 100 per cent British dairy
• Sainsbury’s launched its cheese development group
• Costa Coffee became the first high street coffee chain to source from a local milk group
• Dialogue has been opened with foodservice suppliers, Premier Foods, 3663, Brake Bros, and Compass Group
• In the processing sector, Dairy Crest is the first milk buyer to announce encouraging changes to its milk contract offer, and First Milk and Wyke Farms have made commitments to review their contracts this year
• Dairy UK launched its Proud of Dairy Campaign, and
• The FSA launched National Dairy Week, which took place for the first time on February 22-28, 2010.

The next chapter

There is, however, still much work to be done as Asda’s announcement last week that it was shedding 200 of its dedicated dairy supply base only served to highlight. Sadly, low milk prices and rising input costs continue to force many dairy farmers out of business.

Most industry pundits agree prices are set to rise, but how long do producers have to wait, before they get a fair deal?

Mr Jones says it will take time for increased global demand to push up UK producer prices.

“I think we will see some improvement over the next 12 months, but it may take longer for dairy farming to return to profit levels which bring back confidence.”

Dairy UK director general, Jim Begg is broadly in agreement. “Milk prices have been on a downward slide, partly due to the economic recession,” he admits. “All the market indicators point to a fairly stable 2010, but thereafter, change is definitely coming.

“Demand is going up, with forecasts of a 20 per cent global rise by 2020. Australia, New Zealand and the USA have all experienced a decline in productivity. This should eventually lead to an upturn in UK prices.”

One issue often raised by farmers is retail price. Milk is an essential item in the shopping basket, yet it costs far less than many other drinks, such as fruit juice, carbonated ‘pop’ and even mineral water, in some cases. Obviously supermarkets have to be competitive, but with the industry in such a fragile state, many suppliers cannot understand why milk is used as a loss leader.

However, Mr Jones says focusing on retail prices draws attention away from the real problem, which is the distribution of margin along the supply chain.

“In fact, the retail price bears little relation to the farmgate price. We need to reform contracts, which at present allow processors to pay producers whatever they like, from one month to the next.”

Even the ombudsman could provide little support in this area. Although he welcomed its introduction, Mr Jones says it would be a mistake to rely too heavily on it: he warned it would only be able to curb the “worst abuses” of power by the major retailers.

To try to address the problem, the NFU relaunched its model raw milk contract at last year’s Dairy Event. It was designed to bring greater fairness to the relationships between milk producers and purchasers, helping dairy farmers to better understand their contracts and ultimately giving them a better negotiating stance. Initial surveys of farmers who have used it, have been positive.

Mr Jones says: “Buyers are realising that milk contracts need to change, and producers need to keep up the pressure.

“Every milk producer should get involved in the lobbying, or at least speak to a representative about their concerns.

“Don’t expect our customers to look after us – we must look after ourselves.”

In addition, NFU chief dairy adviser, Hayley Campbell-Gibbons believes further progress on milk contracts is expected later this year.

“We are awaiting recommendations from the EU Commission’s High Level Expert Group on Milk. It has identified contracts between milk producers and purchasers as a fundamental factor in ensuring fairness in the dairy supply chain.

“For the first time ever in the dairy industry, everybody is talking about milk contracts on an EU scale.

“However, there is still a long way to go. The delay between the rise we’ve seen in dairy commodity prices and the rises in some – but not all – farmgate prices, is a prime example of why things need to change,” says Ms Campbell-Gibbons.

Mr Jones also concedes there is much work to be done on cheese although he was positive about the outcome.

“Cheese prices desperately need to improve. A rise is long overdue but it is proving difficult to get.

“However, there is a shift in attitude and things are changing.”

Campaign continues

Bound copies of every signature are being sent to: Asda; Morrisons; Tesco; Sainsubury’s. Marks & Spencer; Waitrose; The Co-operative; Aldi; Lidl; Milk Link; First Milk; Arla; Wiseman; Dairy Crest; Compass; Sodexho; 3663; Brake Bros and Premier; Starbucks; and Pret a Manger.

We will update you on their responses in the coming months.

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