The NFU has written to the Efra Select Committee calling for an urgent investigation into the country’s liquid milk processing sector to safeguard the long-term prosperity of the UK dairy industry.
The request comes just a fortnight after the collapse of Welsh liquid milk processor Tomlinson’s Dairies Limited, now in administration, which forced more than 70 dairy farmers to find an immediate new buyer for their milk and left many without payment.
NFU dairy board chairman Michael Oakes said: “The recent collapse of Tomlinson’s brings into sharp focus some of the issues we’ve seen recently in the liquid milk market. Tight margins across the dairy supply chain have left us in an unsustainable situation with the farmer carrying much of the risk.
“There have been sharp cuts in the farmgate milk prices paid by most major processors to around 24/25ppl, well below the cost of production for many dairy farmers. This is putting severe pressure on those farmers who have not fully recovered from the 2016 downturn which saw the farmgate price drop below 20ppl.
“Those price cuts have come about because contracts between farmers and processors are based on discretionary pricing – where the processor can unilaterally change the price paid to the farmer, without consultation. No business can function or plan for tomorrow without certainty or clarity as to how much it will get paid for its product. We have been arguing for years that there needs to be greater fairness in dairy contracts, with risk and reward shared more fairly across the supply chain.
“To achieve long-term success, the UK dairy sector needs a viable supply chain.”