Select Committee on Agriculture Appendices to the Minutes of Evidence


Letter to the Committee Chairman from Mr Oliver Dowding, Shepton Farms Ltd (F 63)

  I wanted to write and make an observation on the organic milk price, which you may find useful in your ongoing Agriculture Committee inquiry into Organic farming. My point relates to Iceland supermarkets, whom you are probably aware wish to challenge the existing organic premium prices and sell their organic ice-cream at conventional prices. My observation goes beyond the obvious, ie they are selling a very high end value product that utilizes relatively little basic ingredient in its manufacture.

  Iceland has observed to me that they think it should be possible to produce organic milk at 25p/l. I disagree, on the following simple basis.

  Promar, who are probably the country's leading dairy consultant's and costing analysts, state that few—if any—producers will be making a profit at 21-22p, for conventional milk. The largest producers may be making approx 1.5p, on a milk price of 19.2p, but this has to cover capital replacements, private drawings, family labour, debt repayments etc. The herd represented by this sample are larger and more efficient than the majority.

  We have to bear in mind that if the milk price rises, there are a lot of others in the supply chain to agriculture who have been under pressure and will be wanting to raise their prices at the first sign of more to draw from! Unfortunately, this includes the milk quota lessors, and with 20 per cent of milk produced on leased quota you can see how fast this money will disappear.

  However, if we assume that conventional milk did get back to 24p, then a 25 per cent premium is going to leave organic at 30p/l. So, our price is not out of line, and surely any suggestion that others can do it cheaper is not based on realism, but a speciality, niche, and highly profitable product. As you will be aware, Irish conventional farmers are receiving something near 28p/l and the country is 600 per cent self-sufficient! Again, 30p/l for our organic seems excellent value.

5 October 2000

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2001
Prepared 24 January 2001