Welsh Dairy Show preview
We need to exploit developing markets
Dai Davies, this year’s Welsh Dairy Show president and a Carmarthenshire milk producer, as well as chairman of Hybu Cig Cymru, the Wales-based red meat promotion agency, puts his slant on today’s dairy industry.
Costs of borrowing are at an all-time low; the euro is worth 87p; export potential is at an all time high; there is a population of 62 million on our doorstep; production levels are 20 per cent below quota. We are producing milk in the land of dreams.
That was certainly what we dreamed of 10 years ago when we were told the pound was too strong and too high a percentage of our milk was a commodity.
Over the last two years, we have experienced the firming of global markets and favourable exchange rates mean returns from the market should be riding high.
Instead, we find our farmgate prices are 2p to 6p lower than our Western European colleagues.
Despite having the added bonus of a home market for liquid and high value dairy products, the market is monopolised by retailers prepared to undermine the sustainability of production in favour of market share.
Ten years ago, dairy producers would have been happy to have a fortress Britain market economy in order to restrict the inflow of cheap imports, resulting in suppressed prices.
At the time processors were enjoying good margins and had little desire to explore markets outside our shores. Their actions failed to build export marketing expertise.
Lacking the product mix required to penetrate developing markets, they now find themselves squeezed by dominant retailers.
For far too long, processors have promised dairy farmers would have jam on their toast tomorrow. Part of their weakness may be they have not woken up to the fact developing markets may favour croissants and pain au raisin.
We need to produce what the export market is hungry for if we are ever to escape the stranglehold retailers have over us.