The much heralded introduction of the Dairy Code of Practice in 2012 had done little to positively affect the farm gate milk prices and was largely ineffectual in the midst of market surpluses and a lack of alternative options, according to a Farmers Union of Wales report.
It says that following the abolition of milk and the absence of any observable or predicted changes to current global supply and demand, it was imperative the milk market was managed in a manner which stabilised prices.
“The UK dairy industry continues to reel under months of continuing low prices and poor profitability and almost half of dairy farmers in Britain have stated an intention to quit the sector,” Rhydian Owen, the union’s milk and dairy produce committee chairman, said today (Tuesday, May 3).
CONCERN
“We are extremely concerned that any sign of a price recovery may still be some way into the future due to a continuing global supply and demand imbalance.
“The market has to be managed in a way that ensures a fair standard of living, protects producers from the effects of unfair practices and strengthens their position in the supply chain.
“The on-going Russian trade embargo, coupled with reduced demand in China and a weak economic environment will likely delay price rises beyond any potential downturn in production,” he added.
Measures that enhanced the sustainability and viability of the dairy sector were essential to ensure future competitiveness and innovation.
RESILIENCE
In order to preserve the future of dairy farming, it was crucial to ensure that resilience did not merely focus on producing milk at lower prices, but instead recognised the need to intervene in a way which mitigated the wealth of issues out of the control of the primary producer.
According to the report, smaller producers and those in remote areas were being left vulnerable during periods of oversupply.
“The industry could see even more falls in producer numbers as processors ‘cherry-pick’ producers in a bid to reduce operational costs,” added Mr Owen.
“Supporters of the dairy code believe it could form the foundation for prices which, while continuing to vary between contracts, nevertheless represent the true value of milk.
VOLATILITY
“That would reflect a supply and demand dynamic that UK milk prices have failed to recognise over the last decade.”
While the industry needed different types of contracts to cope with embedded marketplace volatility, there must also be a concurrent effort to increase transparency and proper policing in the UK supply chain.
Contracts which included mechanisms such as A and B pricing must also work for the producer when demand outstripped supply and should not be used primarily to reduce incomes in periods of oversupply.
“We would like to see a system whereby the dairy code is properly policed so that we can tell straightaway if the purchasers are cherry-picking and if they are not playing fair,” added Mr Owen.
Source: FG Insight
