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Farmers Force Concessions on Milk Prices

August 31, 2015 Leave a comment

For a few weeks at the beginning of August newspaper headlines were full of stories of farmers protesting inside supermarkets (sometimes bringing cows with them!) and blockading a distribution centre over ‘farmgate’ prices they are paid for milk.

Whilst farmers estimate a litre of milk costs them 30-32p to produce, prices dropped to an average of 23.01p earlier this month, meaning that farmers are mostly producing below the cost of production.

There are multiple factors which have driven the price of milk down as supply on a world scale has outstripped demand. The recession in China and a Russian import ban have limited demand, whilst an end to EU maximum production quotas mean that large dairy farmers are producing more squeezing out smaller farmers. Whilst UK consumption of milk has increased recently and now stands at 5.5bn litres, the value of sales has dropped from £3.5bn in 2009 to £3.2bn this year

Whilst the milk industry has over 9,724 producers in England and Wales alone, this is far down from an estimated 25,000 in 2000. Numbers are falling year on year, at an average rate of 6.2% across the EU. In the last year in England and Wales there has been a decrease in producer numbers by 421.

The UK dairy industry is mostly based around smaller herds of around 125 cows (although that itself is up from 30 in the 1970s). This dwarfs in comparison to mega-dairies, such as one currently being built in China which is designed to have 100,000 cows! Such mega dairies have many environmental issues associated with them, such as infections spreading through herds kept indoors, health issues in the cattle due to lack of grazing access and long periods of confinement as well as huge pools of manure to dispose of.

Historically the Milk Marketing Board served as a buyer of last resort of milk, maintaining a minimum price for milk until it’s abolition. There have been calls for it’s reintroduction, but even this intervention into the market was limited leading to the Board having 70-80 million gallons of milk left over after they’d sold it ot processors each year in the early 60s. This saw the Board establish it’s own processor, Dairy Crest, which after privatisation is now the UK’s biggest dairy processor.

But there is plenty of profit being made in this industry, the biggest 4 processors (Dairy Crest, Muller-Weisman, First Milk and Arla) was over £100m a year in 2012. Dairy sales make up a little under 10% of sales from supermarkets, themselves generally very profitable despite a few recent blips.

Socialists call for bringing the big dairy processors and supermarkets into public ownership under democratic control so production of dairy products can be planned to meet the needs of ordinary people and guarantee a sustainable ‘farmgate’ milk price. The land owned by big agro-business should be brought into public ownership and leased at affordable rents to tenant farmers. The wealth generated by nationalised processors & supermarkets could be invested into research that, rather than squeeze milk as quickly as possible out of cows, develops sustainable, human farming methods, as well as alternatives to dairy products.

On the back of the protests Aldi, Lidl & Asda have all agreed to pay a minimum price of 28p a litre, whilst Morrisons will pay a minimum 26p a litre whilst also introducing a new branding costing 10p more per litre which it says will be passed straight on to farmers. This fact, that protests have worked in forcing major supermarket chains to alter their policies, is perhaps the main lesson retail workers should take note of.

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