Milk Prices Going Sour
By Bernice Hurst, Contributing Editor, RetailWire
A combination of retail and manufacturer pressure as well as market deregulation
is causing crisis conditions for dairy farms across the globe. As Dean Best
of just-food explained, the global economic downturn has been "sapping
consumer demand for dairy products and forcing dairy commodity prices down." Small
herds and inefficiencies have also been cited by some who believe that imported
milk offers better value.
Smaller farmers have been particularly challenged in competing with so-called
super-dairies, according to Stephen Oldfield of PriceWaterhouseCoopers (PwC).
PwC was recently appointed as receiver to cooperative Dairy Farmers of Britain
(DFB) which supplied some 10 percent of the country’s milk. DFB’s 1,800 farmer
members won’t be paid for their May deliveries; June payments are also in
Individually, the cooperative’s members stand to lose their initial investment
as well as current and future revenue streams. Hayley Campbell-Gibbons, chief
dairy adviser to the National Farmers’ Union (NFU), told the Financial
Times, "The average farmer with 200 cows will lose at least £14,000
on milk and about £50,000 in investment."
Just-food also reports that France’s farmers federation, the FNSEA, "has
called on its members in all areas of the farming sector to ‘make a stand’
against market deregulation and the system of price margins, which it says
heavily favors food processing groups and retailers." Industrial action
planned for June 11-13 was "aimed at retailers’ distribution platforms
as well as hypermarket and supermarket outlets," just-food went
on. Blockades at several distribution centers were blamed on dairy farmers
who were unhappy about a previously negotiated price agreement.
American dairies are also suffering. The Scranton Times Tribune reported
on similar problems for dairy farmers in the region. As one said, "There
were times before when the prices were low, but the costs were never so high." In
Pennsylvania, average prices dropped 33 percent in the last year but production
costs were only down by 8 percent. Expenses exceed payments for many.
Efforts by both the E.U. and the U.S. to support dairy farmers with export
subsidies have irritated Australia and New Zealand, however. As major exporters
themselves, ministers from the two countries joined several others in Bali
to protest against protectionism.
As for DFB, while large suppliers and other cooperatives continue supplying
retailers, consumers may not even notice any difference. Several large dairies
are already in negotiation to buy DFB which means that as its members either
find new customers or go out of business, further consolidation may result.
This could also be seamless as far as the general public is concerned.
Discussion questions: What, if anything, can or should be done about
the plight of dairy farmers? What ramifications might it have for dairy
prices in the future? What’s the root of the dairy industry’s problems?
[Authors commentary] On Friday, June 12, just-food reported that
French government ministers had called a meeting with the farmers’ union
following blockages at distribution centers. The dispute is by no means settled,
however, as retailers’ initial offer would be funded by increasing the price
to consumers, something one union representative described as "too easy."
- The demise of Dairy Farmers of Britain leaves sour taste – just-food.com
- Farmers federation calls for "robust action" – just-food.com
- Australia hits out at dairy subsidies – just-food.com (subs. required)
- Small dairy producers face skimmed payments – Financial Times
- Dairy Farmers of Britain succumbs to price pressures – foodanddrinkeurope.com
- Dairy farmers suffering through worldwide milk glut – The Scranton Times