Hopes that Wiseman move will bring milk price stability

Published on Thursday 12 March 2009 20:55

THERE has been mixed reaction from dairy farmers to this week's trading statement from Robert Wiseman Dairies, especially news that Tesco is cutting its order.

Jimmy Mitchell, chairman of NFU Scotland's milk committee, seized on the news that there will be no immediate price cuts to producers.

He said: "The headline message for our farmers from the solid trading statement is the intention of Scotland's largest milk processor to hold the price it pays to its farmers until at least 1 May of this year.

"The start of 2009 has seen all milk purchasers in Scotland cut their ex-farm prices against the background of huge volatility in the prices of commodities such as butter, bulk cheese and milk powders. While Wiseman may only operate in the fresh liquid market, we would hope that its example will see all other milk buyers deliver a much-needed period of price stability to Scottish dairy farmers before returning to better and more sustainable levels later in the year."

Dairy commodities on the international markets have fallen sharply over the past three months, forcing the major buyers to realign their prices. In the UK there has been something of a domino effect since early January and there is currently little margin left for producers in the face of increasing costs, especially for fertilisers. But the irony is that the Britain is short of milk and several processors have been forced to buy in several million litres of milk from Northern Ireland and mainland Europe.

Mitchell is anxious to see how the news that the company is to lose some volume sales with Tesco will work out in practice.

He said: "The most worrying note in the trading statement is the news of an 80 million litre cut in the volume of milk that Wiseman supplies to Tesco for its own label products. However, this cut in own label deliveries is counterbalanced by an increase in the volume of Wiseman branded milks being sold in Tesco stores, but the net loss in volume for Wiseman is still around 40 million litres."

This could have implications for Scottish dairy farmers currently signed up to Tesco supply contracts, according to Mitchell. "Wiseman currently supplies all Tesco's own label requirements in Scotland and has indicated that there will need to be changes to accommodate this loss in volume.

"These changes will be discussed between Tesco, those dairy farmers supplying the supermarket's contract and Wiseman in the coming days and weeks. We will monitor the progress on those discussions."

That last thing producers need is uncertainty and it has been stated repeatedly that any further price reductions could well trigger a major exodus of dairy farmers.