Fears that producers are missing out on the cream

THE past year has been characterised by strong demand and high prices for butter, cheese and milk products according to an industry report published yesterday but NFU Scotland was in no doubt who had run off with the proverbial cream from this price bonus and it was certainly not the primary producers.

In its annual report into margins within the industry, DairyCo, the levy funded organisation charged with carrying out research and promotion, revealed that the prices farmers received for their milk had increased by 5 per cent compared to the previous year.

However, this increase faded into insignificance compared with the market indicator which reflected returns from butter and powder commodity markets which had rocketed a staggering 31 per cent in value.

An NFUS spokesman predicted this discrepancy between the two figures would "further fuel the huge level of frustration and anger that is building at grassroots level".

It would also he believed give further strength to the union call for a transparent, market related pricing mechanism being built into all dairy contracts between producer and milk buyer.

"Had that already been the case, then producers would have been receiving a price for their milk that better reflected the 31 per cent hike in wholesale prices for butter and powder seen last year," said the spokesman.

It would also have helped cover the significant surge in input costs that farmers have faced in the past year, he suggested..

"Instead, average farm gate prices increased by a lowly 5 per cent and were significantly out of step with real markets for milk and dairy products," he added, pointing out that UK producers were languishing at the bottom of the European milk price league table as well as operating with a farm-gate price that was generally below the cost of production.

Two months ago, the union launched a proposal that in future milk prices should be based on values being paid in the processed cheese and butter sectors. This idea was almost unanimously supported by producers but so far has not been taken on board by either the processors or the retail trade.

Yesterday the spokesman returned to this idea, saying it was in the interest of all parties that a solution to the chronic and ongoing failure of the milk market was identified.

"Our members have given us a clear mandate to pursue contractual improvements that will give them the confidence to invest in their businesses going forward and grow the Scottish and UK dairy industry," he said.

"By September, we will have discussed our proposal with all parts of the chain and we will host a meeting at the Dairy Event in Birmingham on 6 September to take those discussions forward."