Falling milk prices push British farmers to the brink

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It was business as usual at an Asda supermarket in Stafford, United Kingdom last Sunday – until shoppers saw two cows walking through the aisles.

The animals, herded by local farmers, entered the store and headed straight to the dairy aisle. One of the farmers shouted to customers, “A pint of milk cannot be cheaper than water!” before buying all the milk available and distributing it outside the store for free.

Farmers across the UK took to various supermarkets in a day of action to protest the historically-low price at which they are being forced to sell their milk to the country’s leading supermarket retailers.

The farmers recorded their protests on their smartphones and posted updates on Twitter and Facebook. The hashtag #milktrolleychallenge set social networks ablaze.

The National Farmers’ Union (NFU) has slammed the supermarkets for launching a “price war that is crippling the dairy industry in the UK”.

In June 2014, supermarkets paid dairy suppliers 31.66 pence per litre (US$0.48). A year later and the price had plunged to 23.66 pence (US$0.36), according to the farming watchdog, the Agriculture and Horticulture Development Board (AHDB).

“The average cost of production is near 30 pence (p) per litre,” the NFU’s dairy adviser Rosie Maltby told Equal Times. “But some farmers are now receiving milk prices of around 15p per litre, so most UK farmers are losing money on every litre of milk they produce.”

Some 85 per cent of British milk is processed and consumed in the UK. Products are sold to the public through retailers. Therefore, says Maltby, supermarkets have a huge responsibility towards British farmers. “These products are purchased at retail. Retailers have a crucial role in the dairy supply chain”.

Despite the protests, some supermarket chains are trying to assure their customers that they pay farmers a fair price.

Sainsbury’s, the UK’s second biggest supermarket, said in a statement: “Our milk prices are competitive for our customers, while also paying our dedicated dairy farmers a fair price that protects them against volatile markets.”

A spokesperson from Asda’s communications department stressed the company’s commitment to build “an open and transparent relationship with farmer owners” and on 14 August, it announced that it would pay farmers 28p (US$0.44) per litre for all liquid milk sold in its stores.

Meanwhile, Morrisons – the UK’s fourth biggest largest supermarket retailer – said it would sell a ’premium milk’ for 23p (US$0.36) more than the standard four-pint bottle, which costs just 89p (US$1.39).

 

A bleak future

Supermarket chains usually pay suppliers based on the cost of production in an attempt to shield farmers from market volatility. Sainsbury’s, for instance, told Equal Times, that it reassess production costs every quarter to adjust them to shifting market conditions.

But for British farmers this system is no more sustainable than it is accurate.

Rachel Parker is from a family of dairy farmers in Lancashire. “Dairy farmers have had their price paid per litre cut repeatedly over the last years,” she told Equal Times. “Yet the cost of production – fodder, bedding, healthcare, staff wages, etc – has remained similar. That means many are making a loss daily.”

Falling prices has had a massive impact on businesses over the years. According to the AHDB’s Dairy Statistics Insider’s Guide, the number of dairy farms in the UK has plummeted from 35,000 in 1995 to just 13,200 in 2014.

And the future doesn’t look any brighter, according to Parker.

“Farmers and their families are under huge financial strain. Businesses are being sold. Farms that have been home to families for generations are now gone.”

But farm closures will only be the tip of the iceberg if urgent action isn’t taken to improve conditions in the industry.

“If dairy farmers are forced out of business, cheap milk will be imported from other countries. This will mean inferior quality, no traceability and no guarantee of animal welfare.”

 

Milk economics, dairy geopolitics

The general crisis of the British dairy industry has links to the state of the global economy and geopolitics. “The situation is made even more dire due to extra pressures on the global marketplace,” said Maltby.

Recent EU sanctions on Russia and China’s shrinking demand for milk have deprived British farmers of foreign markets in which to sell their surplus. The industry, therefore, is producing more milk than the market can absorb.

But the current milk crisis is far from being a uniquely British phenomenon. Dairy farmers across Europe have also been protesting against consistent revenue losses.

In recent years, European farmers have asked the EU to address the issue, with repeated protests in Berlin, Paris and outside of the European Parliament in Brussels.

Back in the UK, as NFU continues its negotiations with supermarket chains, Morrisons has made headlines for its plans to launch a ’pro-farmer’ milk brand this autumn. For every carton sold, 10p (US$0.16) will go straight to the producer.

But with critics dismissing the move as a token gesture and further protest actions planned for the coming weeks and months, the David versus Goliath battle taking place between British dairy farmers and British supermarkets is far from over.