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Milk pricing row turns sour as farmers blockade cartels

Simon Basketter looks at the dairy farmers’ protests that have targeted processing plants in recent weeks



Several thousand farmers have staged demonstrations outside dairies in Britain. They have blockaded entrances with machinery and poured milk down drains. But why?

It costs dairy farmers more to produce their milk than they are getting from selling it on to processors. These companies then pasteurise and bottle milk before selling it on to supermarkets.

It costs farmers about 30p to produce a litre of milk yet they receive just 25p per litre. This is a battle caused by big businesses’ control over food.

Robert Wiseman Dairies, First Milk, Arla Foods UK and Dairy Crest all recently announced cuts to the price they pay farmers per litre of milk. And all of them except Robert Wiseman Dairies have backed down after the protests.

Prices for farmers have stalled over the last 15 years. In 1997 they were receiving the same price as they are today—yet in the same period animal feed costs have doubled.

A huge part of the problem is the supermarkets. British retail giants Tesco and Sainsbury’s, along with Waitrose and Marks & Spencer, claim they are paying farmers a “sustainable” price for their milk.

But this rate only applies to a selection of their suppliers. Only 11 percent of dairy farmers, supplying 15 percent of milk are part of the deal.

The small group of preferred suppliers on a higher rate is subsidised by many more farmers supplying low price milk.

And those on the higher rate are still at the mercy of the supermarkets. Asda, Morrisons and the Co-op all pay less.

The milk industry is worth £3.3 billion. Some 87 percent of raw milk is bought by 5 percent of the processing companies—the big ones completely dominate the market.

Commodity

The fall in global commodity prices lies behind the current row over pricing. This is how the big processing firms justify the cuts. Bulk cream prices, in particular, halved between the summer of 2011 and this spring.

The problem is short term profiteering and a long term trend in falling profits. When global cream prices were high in 2010 and 2011 processors used the money to subsidise a price cutting battle for retail market share between them.

Now the fact that cream prices are falling has exposed the deals that processors struck with supermarkets in 2010.

They sold milk to supermarkets at such a low price that they became dependent on high cream values to remain profitable—and to pay anything like a sustainable milk price back to the farmer.

Then there is a long term trend. The reason is that separating out the cream from milk increases the option for valued added products. That is what lay behind the move to skimmed milk in recent decades—rather than any supposed health benefits.

The drive to finding an increasing number of ways to get profits out of dairy made the industry more and more dependent on things other than simply a pint of milk.

But this diversification has further increased the power of big business. The pursuit of profit causes chaos in food production across the globe. The milk price crisis is just one part of that.


Half of farmers disappeared

The number of dairy farmers halved in the last decade from 35,741 to 15,716 in 2010. Small farmers have all but disappeared. In Britain the average size of a dairy herd is 117 while the average in the rest of the EU is 42.

There are a million fewer dairy cows in Britain than a decade ago. Yet the amount of milk produced is higher.


It’s the Tories’ fault

The Milk Marketing Board used to set a minimum price for milk until 1994 when the Tories deregulated the industry. Labour closed it down completely in 2002. The processing arm became Dairy Crest.

The farmers’ organisations made little attempt to defend the milk marketing board. They thought they could get more cash out of deregulation. They were wrong—it brought more power and profit for bigger business.


Largest dairy group created

Arla foods is owned by Walmart and processes dairy produce for Asda. It is about to merge with the co-operative Milk Link to create the country’s largest dairy group. It will produce a quarter of all milk in Britain.


Why are rich and poor fighting together?

The protesting farmers are bosses. Some, though not many, are small farmers. The National Farmers Union is the voice of the largest farmers—and a stalwart of the Tory party.

It was their lobbying that saw the government arrange for talks with the processors. They announced a deal, but the protests continued.

In part this was because of the tensions between the bigger farmers and the others. The militant wing of the farmers wants to stand up more to multinational food corporations and supermarkets so their businesses will survive.

Farmers For Action (FFA) organised the blockades. FFA chair David Handley is a tenant on a small 88 acre farm in Wales. Yet one of FFA’s founders is Derek Mead—a rich farmer. Mead has a 1,600-acre arable and dairy farm in Somerset with 380 cows.

This makes it a contradictory and confused movement. There is no movement specifically for small farmers to get behind.

However, there are thousands of workers on dairy farms whose jobs are threatened by the price cuts. There are 51,000 full time workers, 32,000 part time workers and 48,000 casual workers on UK farms.

This year the Tories abolished the national body that set their wages. Yet again the Tories make life easier for their friends in business.


Article information

Background Check
Tue 31 Jul 2012, 16:51 BST
Issue No. 2314
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