Dairy Industry Urged to Use Rising Prices for Sustainable Future
03/07/07

The dairy industry was yesterday urged by four of its leaders to use rising milk prices wisely to lay down sustainable and profitable foundations for the future.

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The advice came at the launch of a new report Routes to Profitability 2: practical steps forward, which examines why and how the industry should focus on developing innovation, relationships and efficiency as a long term way out of current price and supply difficulties.

Chief executive of the MDC Ken Boyns, NFU Scotland president Jim McLaren, NFU Dairy Board chair Gwyn Jones and Dairy UK director general Jim Begg appeared together at the launch of the report - which was produced by the MDC at the request of NFU Scotland - to give an unprecedented joint statement.

They collectively welcomed the report's contents, especially the opportunities it identified to turn around the UK's growing trade deficit in dairy products, which increased to £944 million in 2006.

They agreed that the recommendations for high levels of on-farm efficiency matched by similar measures from milk processors could create a platform for investing increased market returns in added-value products. While it was accepted that new products could be expensive and difficult to introduce, the report identified clear opportunities for 'quick wins', for example by differentiating existing produce on the basis of provenance.

Ken Boyns said that overall there was one clear message from the report - the need for producers, processors and retailers to focus on long term goals and make the most of these medium-term improvements in prices.

He said: "The increasing prices in the commodity markets should put a much-needed floor in the market and this will finally give many producers the means to invest in their future.

"But the report shows clearly the means by which we can improve the long term future of the industry. So it's important to make the most of the increasing prices and 'make hay while the sun shines'."

Jim McLaren echoed this sentiment, explaining that there were tremendous opportunities to add value to the UK dairy industry. "There is an enormous and growing trade deficit for dairy products in the UK, primarily because we are exporting low-value products like cream and importing high value cheese and butter. We need to turn that around if we are to have a viable future.

"There is also increasing public attention being paid to the environmental integrity of our food and drink, its provenance and its health benefits. That is against a backdrop of a more positive milk market which should lead to improved farmgate and processor returns.

"In other words, we have an opportunity over the next two years to invest and lay a foundation for a profitable industry, to the benefit of everyone in the supply chain from farmers to consumers."

Gwyn Jones agreed it was vital dairy farmers recognised this unique opportunity to change the dairy industry so that it would be better equipped to face the future.

"We must ensure that we are not as exposed to commodity markets in the future," he said. "We need better contracts, more innovation, more branding and added-value products, which should all be cemented in a desire for long-term relations and a commitment to work closer together as an industry."

Jim Begg added: "The UK dairy industry has very good reasons to be optimistic for the future. Rightly, it is focusing very heavily on adding value to milk and making sound structural preparations for the future. At a time when milk prices are rising it is imperative that all efforts are being made to bring, producers, processors and retailers together in win-win situations."

Routes to Profitability 2 is the follow up document to Routes to Profitability: Is reduced milk production the way forwards? which was published in 2006, also at the request of NFU Scotland.

While starting out as an examination of whether reducing milk production was a viable way of increasing the milk price, it concluded there were three key elements to a successful future industry: - innovation and consumer education to stimulate and grow demand - better relationships within the supply chain to provide a fair return to all - efficiency and competitiveness in all parts of the supply chain.

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