Pressure is mounting on retailers who have started to offer to buy milk from processors at an increased price but it is unclear how much this will impact on the price paid by processors to farmers.
ASDA has committed to paying 28p/litre to their milk supplier Arla although because Arla is a co-operative I believe the increase in price will be pooled across all 13,500 farmer members throughout Europe, not just British farmers which would dilute the benefit of this rise here in the UK.
NFU president Meurig Raymond said: “The NFU has been lobbying tirelessly for Asda to recognise the plight of the dairy industry so we are pleased that Asda has moved to support farmers in their hour of need.
“It is clear from Asda that this commitment is to support the UK dairy industry at a time of crisis. It is now important that Arla ensures this is delivered to British farmers on the ground, with immediate effect.
Aldi and Lidl have also made new commitments to pay processors 28p/litre while Morrisons will pay 26p/litre for milk before processing costs.
The Morrisons move followed the retailer’s previous announcement that it was preparing to launch this new brand giving customers the option to pay an extra 10p/litre more for it on the basis the extra 10p/litre would go back to the farm.
Again the detail as to how these new pricing plans will work is not entirely clear. But it is certain that the pressure put on retailers by farmers taking direct action and by talks behind the scenes between farming leaders in the NFU and other organisations is having some effect on the liquid milk market at least.
However, liquid milk is only one part of the dairy market. About half the milk produced in this country is processed into other products such as butter and cheese and farmers supplying milk to cheese processors for example will be unaffected by these developments.
So there is much more work to be done to help our dairy farmers across all sectors but there is no magic bullet which can insulate UK dairy farmers from the disastrously low world dairy commodity markets which are showing no sign of improvement.
James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk
A property blog written and authored by our specialist blogging team, discussing all and any matter relating to the residential, rural and commercial property markets.
Showing posts with label asda. Show all posts
Showing posts with label asda. Show all posts
Wednesday, 2 September 2015
Monday, 24 March 2014
Price of milk cut
Three weeks ago Tesco cut its price of milk from £1.39 to £1 for four pints and since then Sainsbury’s and Co-op have followed, matching the price already offered by Asda, Lidl and Aldi. This price is equivalent to 44p per litre.
Then, a fortnight ago Morrisons not only announced it had made a £176m loss in the year to 2 February but also that it was planning to take Lidl and Aldi head on. This new policy is evidenced by their announcement that they will be cutting the price of their two litre “Meadow Park” pack to an equivalent of 42p per litre which it claims will make it the cheapest price on offer.
This was followed last week by and announcement from Sainsbury’s that its sales excluding fuel had dropped by 3.1% in the last three months. This is a substantial fall and what this seems to indicate is that despite the reported strength of the economy, we as consumers are still looking for good value and supermarkets as a whole have to be extremely competitive to maintain their market share.
This is of course good news for consumers because it means supermarkets are having to squeeze their margins to maintain sales but what concerns me for British agriculture is that it will not be long before the supermarkets will look to transfer some of their pain down the supply chain to farmers and other suppliers.
At present this does not appear to be happening in that the price farmers are being paid for their milk is at an all time high although this is partly because the price of milk products on world markets has also been very strong. However, there are signs that the tide may be moving in the other direction as indicated by recent auctions held by New Zealand based dairy co-operative, Fonterra. These auctions are a good indicator of world dairy commodity prices and at their last auction the global dairy price index dropped by 5.2%.
So with global dairy markets beginning to drift and a supermarket price war in progress, dairy farmers should perhaps prepare themselves for lower milk prices in the months to come. Having said that, the best dairy farms are making good money at present and should continue to do so provided they keep a close eye on their costs and ensure that their milk production system is aligned with the requirements of their milk contract.
Then, a fortnight ago Morrisons not only announced it had made a £176m loss in the year to 2 February but also that it was planning to take Lidl and Aldi head on. This new policy is evidenced by their announcement that they will be cutting the price of their two litre “Meadow Park” pack to an equivalent of 42p per litre which it claims will make it the cheapest price on offer.
This was followed last week by and announcement from Sainsbury’s that its sales excluding fuel had dropped by 3.1% in the last three months. This is a substantial fall and what this seems to indicate is that despite the reported strength of the economy, we as consumers are still looking for good value and supermarkets as a whole have to be extremely competitive to maintain their market share.
This is of course good news for consumers because it means supermarkets are having to squeeze their margins to maintain sales but what concerns me for British agriculture is that it will not be long before the supermarkets will look to transfer some of their pain down the supply chain to farmers and other suppliers.
At present this does not appear to be happening in that the price farmers are being paid for their milk is at an all time high although this is partly because the price of milk products on world markets has also been very strong. However, there are signs that the tide may be moving in the other direction as indicated by recent auctions held by New Zealand based dairy co-operative, Fonterra. These auctions are a good indicator of world dairy commodity prices and at their last auction the global dairy price index dropped by 5.2%.
So with global dairy markets beginning to drift and a supermarket price war in progress, dairy farmers should perhaps prepare themselves for lower milk prices in the months to come. Having said that, the best dairy farms are making good money at present and should continue to do so provided they keep a close eye on their costs and ensure that their milk production system is aligned with the requirements of their milk contract.
James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk
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