Union Reacts Cautiously to Milk Price Rise
30/03/08

NFU Scotland has reacted cautiously to the announcement from Tesco that it plans to increase the price paid to its liquid milk suppliers by 0.5 pence per litre (ppl).

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For many, this will be seen as scant recognition of the increased costs faced by all milk producers. At the start of March, an independent report, entitled The Real Price of Milk, highlighted the rising production costs facing dairy farmers and asserted that at the moment they need to be paid a price of at least 29.64ppl in order to be able to reinvest in their businesses and secure a viable future.

Today’s announcement from Tesco takes the price it pays its dedicated suppliers up to 28ppl.

Willie Lamont, NFU Scotland Milk Committee Chairman, said:

“For over a decade dairy producers have been experiencing prices which are simply unsustainable, being exceeded by costs of production. They have been unable to reinvest in their businesses or to make a profit. As a result, many hundred dairy farmers have left the industry.

“Today’s announcement from Tesco is a small step in the right direction and will go some way towards alleviating the increased costs, such as feed, fertiliser and fuel prices rises, being faced by Scotland’s dairy farmers.

“However, whilst the rise will mean that most can now cover their production costs, it still leaves little room to reinvest in businesses, something which as already been put on hold for at least ten years due to poor prices. The long-term lack of investment has led to a reduction in milk production and the only way that this can be reversed is to create a sustainable supply chain which, according to their rhetoric, is what the retailers want to secure.

“The Real Price of Milk report showed quite clearly what is required to make the industry sustainable and so these are the figures that we really need to be seeing. In addition, there needs to be recognition in terms of price increases not only for those supplying liquid milk but also for those supplying milk for other markets such as cheese.

“Tesco now has a job to do in explaining to its producers just how it arrived at this price increase and allow producers the chance to compare this to how their costs have increased and decide if their Tesco contract is still sustainable.

“In order to secure the long-term future of the Scottish dairy industry, we need retailers nationwide to recognise the fact that farm businesses must be enabled to make a profit and for their prices to truly reflect their genuine commitment to securing supplies in the future.”

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