Memorandum submitted by Pippa Woods, Chairman,
The Family Farmers' Association (L2)
The Family Farmers' Association no longer has
many dairy farming members. We are very concerned about the fact
that dairy farming is no longer the mainstay of the small and
family farm, as it once was. It is now so technical and capital
intensive, and also so unprofitable, that fewer and fewer farmers
are producing milk. As I have, personally, lived by, with and
from milk production for 49 years, I hope my experience and opinions
may be acceptable as evidence.
I trust that you will have the actual statistics
provided by economists, and/or the NFU who have professionals
to study them. No doubt they will show you how, over the years,
the proportion of the end price for milk—ie what the consumer
pays—has been getting lower and lower in relation to what
the farmer receives I have noticed that figures given for the
farm gate price of milk tend to vary somewhat, so it may be useful
to quote here what I have actually been receiving over the years.
The figures are pence per litre and are derived by taking the
total sum I receive for milk each year and dividing that by the
number of litres I have sold. Thus the figure is after paying
any transport costs and various other smallish items the dairy
deducts for. I receive most of the bonuses available for hygiene,
welfare, etc. but not all those for low somatic cell count as
I keep my cows well into their old age, by which time they tend
to have higher cell counts.
1995-23p; 1996-2zUl4p; 1997-25,35p (increases
in line with inflation); 1998-2l.58p (what happened?); 1999-l9.96p;
2000-18.21; 2001-7.36; 2002-20.23 (shortage caused by F&M?)
2003-l'7.90p. Have you statistics for retail prices in those years?
I sell direct to Dairy Crest, as their bottling
plant is only 15 miles away. Apart from the price they now pay,
they are very kind and helpful to do business with. They do pay
consistently a penny or so more than the co-ops, which is just
about my profit margin. I only have just over 60 cows, as this
farm is not topographically suited (too hilly) to keeping a larger
herd.
It is commonly stated that the minimum number
of cows for survival is 100, but, in fact, I believe the average
herd is still a little below this. The statisticians will tell
you how it is increasing rapidly. A few years ago 60 was the average
size. Do not be misled by articles on dairying referring to "The
average dairy herd of 100 cows". That is not yet true. Anecdotally,
a recently established enterprise of 500 cows in Cornwall has
just sold up, reputedly because of labour problems. But I have
been reading an article about a farmer who is expanding to 800.
How do the dairies fix the price? I think it
is quite simple. They now pay just enough to attract the quantity
of milk they wish to process. The Dairy Crest annual reports show
that they are making a very satisfactory profit. It increases
by a satisfactory percentage each year. (No doubt you will study
some dairy companies' annual reports,) They do have meetings with
producers when they chat us up and tell us what good milk we produce
and how well they are marketing it. Also, of course, why they
cannot pay us a better price, as they would like to. I have asked
them if they will be happy if so many of us give up that they
only have enough milk for the liquid market, and none for manufacturing
and the reply is certainly not. My personal belief is that they
will continue to pay just enough to maintain their supply.
Another complication is the Monopolies Commission/Office
of Fair Trading. The milk marketing Board was forced to disband
as it was a monopoly. Later the same thing happened to its successor,
Milk Marque. But I believe the government has used the same argument
to prevent supermarkets from agreeing that they would all raise
their milk prices, in fairness to farmers, alleging that would
be monopolistic action.
The simple answer to the question you are investigating
is, therefore, there is nothing to prevent every member of the
milk chain from making as much profit as he can. But we are not
allowed to join together in a monopoly in order to secure a better
price. You will also be aware that all the milk processors belong
to an organisation now known as DIAL. It is very hard to believe
that they do not employ some informal methods of co-operating.
Likewise, there is no reason to suppose that every milk retailer
is not well aware of what the others are charging. All are at
liberty to charge the same low price, provided they do not advertise
that they are acting in unison.
31 December 2003
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