The milk price confrontation between dairy farmers and processors/supermarkets is at such a pitch, and so liable to change from day to day, that trying to second-guess what is likely to happen between writing and publication date is pointless.
For instance, it might have been significant that following two nights of farmers and tractors blockading milk processing plants in several parts of England at the end of last week first the Co-op, then Morrisons, announced they would increase the price paid to dairy farmers.
Or it might not. When a bitter disagreement is taking place about dairy farmers facing ruin because milk processors and supermarkets won’t give them a fair price, it takes a special kind of gall to advertise “Four pints for 98p” as Asda did at the end of last week.
The significance of that is that at £1.18 for four pints, a more common supermarket price, farmers say they are losing 11p per carton sold. Don’t tell me, or try to tell a dairy farmer, that Asda intends to bear the whole 20p difference of making milk a “loss leader”. That difference will be passed on to processors and farmers.
The most common example of what the argument is about has been a graphic of a four-pint milk carton, supermarket retail price £1.18. On that the supermarket makes a profit of 34p because it has only paid the processor – middleman between farm and shelf, such as Robert Wiseman – 84p.
Price paid to the dairy farmer, from August 1 after recently-announced reductions, for the four pints will be about 57p. But the average cost of producing that milk is 68p.
That means from August, unless all other milk buyers follow the lead set by the Co-op and Morrisons, the average dairy farmer will be losing almost 3p on every pint produced – an estimated loss for the average herd of £37,000 a year. Not many small businesses could cope with that.
Not every farmer will lose 3p a pint. The top third of producers will probably still manage to break even because of bigger scale, better management, better control of costs and the multitude of small factors that add up to the difference between a top performer and an average one.
But that is almost beside the point. If average performers, which in any given branch of farming means at least half of us, do their best and still lose money then there is something wrong. What that wrong is has been exercising farmers, politicians, processors and spokesmen for the supermarkets for the past two weeks and the furore won’t die down until cuts of almost 4p a pint since May are restored.
Will that happen? Are supermarket spokesmen correct to say that they’re not the only, or worst, offenders. Are processors right to point to a global surplus of milk leading to lower prices for a glut of by-products such as cream, yogurt, cheese and milk powder, with an inevitable knock-on effect for liquid milk?
Put another way, will the problems for producers of basic commodities such as milk, meat, potatoes, eggs and vegetables, with supermarkets ever end?
Will the bad guys for one commodity always be the good guys on another – for example, Morrisons named as one of the worst for milk, best for selling only British lamb and beef rather than imports?
Supermarkets naturally do not collude on prices or products. But it’s interesting how the bad guy tag gets passed around so that they don’t all take the heat for a bad press at any given time.
Morrisons’ pat on the back for selling only British lamb came from an NFU Scotland “secret shopper” survey. Others, including Tesco, were selling New Zealand and Australian lamb. The worry for the NFU and sheep farmers is whether most shoppers notice.
The NFU for England and Wales has also been carrying out its own inquiries into the way British fruit and vegetable producers are treated. It concluded that home production of cucumbers, tomatoes and spring onions are at risk, along with sprouts, lettuce, leeks and cauliflower.
That is not all due to this horrendous summer and damage caused to horticultural crops by heavy rain and flooding as the NFU found that UK self-sufficiency in vegetables dropped from 73 per cent to 60 per cent in the decade to 2010.
The union pinned the blame for that squarely on supermarket “sharp practice” towards suppliers, tactics once secret that are now fairly well known, such as suppliers being forced to contribute to supermarket promotional campaigns, lack of price certainty, late payment and, in most cases, as film mogul Sam Goldwyn once famously said, a verbal contract with a supermarket not being worth the paper it’s written on.
Richard Dodd, for the British Retail Consortium, said calling such British crops “at risk” was wrong because at least 75 per cent of supermarket fruit and veg is home produced.
He might have to work hard to prove that. But his statement does, unfortunately, emphasise again that the big handful of supermarkets are the main buyers for most farm products. The arguments, and tears, will continue well beyond any resolution on milk prices.