Posts Tagged ‘dairy’
Posted in Opinion by Kate Archdeacon on July 25th, 2012
From Food prices are at the mercy of global pressures that we struggle to control by Jay Rayner:
“But if it doesn’t happen, if Britain doesn’t do more to feed itself, if it doesn’t do more to support struggling sectors such as the dairy industry, we will be left at the mercy of the international markets. The food price rises we would see then would be excruciating.”
The British like cows. We like to see them in fields and regard the dairy industry as much more than merely a part of our food system. Rolling green fields filled with the familiar dots of black-and-white Friesian hide are a key part of our cultural identity. Which explains why, late last week, Twitter came alive with demands from far beyond the farming community for us all to get behind the nation’s dairy farmers in their fight for a fair deal. The announcement by the major processors of a 2p per litre cut in the amount they would pay for milk has pushed the farm gate price well below the average of around 30p per litre cost of production. Dairy farmers, who have been suffering for years, are being pushed to the edge of bankruptcy.
The irony is that too many of the problems in the British dairy industry have been caused both by patterns of consumption by those very same consumers who are leading the charge and by the way they have connived, albeit passively, with the supermarkets to keep prices low. But that is only a part of the story. For the problems experienced by British dairymen are actually representative of something much, much bigger: it’s about the way our national food supply has been left at the mercy of huge international pressures from increasingly volatile food markets.
If the dairy industry were simply a vertical business model involving the retailers paying the cost of production to farmers plus a little bit more, these issues would not exist. Unfortunately it isn’t. The price of milk is dependent on the European market price for its cream component and it’s the value of that which has collapsed. In June of 2011, it was £1,800 a tonne. Now it’s just over £1,000 a tonne. A sudden surge in demand for dairy in the past few years as a result of an emerging, milk-loving, middle class in China resulted, almost inevitably, in global over-supply. Few of us drink whole milk these days and the skimmed-off cream – sold to the cheese, butter and yoghurt markets – has become a vital part of the business model for the processors, which needed it to offset the brutal deals offered by the likes of Tesco, Asda, Sainsbury’s and Morrisons. It is the collapse in the value of cream that those processors are now passing on to the farmers.
Of course, in an ideal world, dairy farmers would break their contracts with those processors and find a different model, but they can’t. They have nowhere to go.
The savage, grossly irresponsible way the supermarkets have forced dairy farmers down on price has also put independent processors out of business. And consumers, apparently delighted to pay £1.18 for a four-pint bottle of milk, haven’t helped. Indeed, for all their talk, consumers show huge reluctance to pay more. For 15 years, Booths, the small, family-owned supermarket chain in the north west, has offered Bowland Fresh, a brand of milk sold at a premium – 52p a pint as against 49p – all of which goes back to the farmers. It accounts for just 10% of sales and has never gone beyond that.
The way a little-known international market in cream is impacting upon dairy farmers here is not a one-off. Our food supply system is now entirely global and exactly the same shocks are being felt elsewhere. In May, as the G8 met at Camp David to talk about plans to tackle chronic malnourishment in the developing world, concerns were expressed that commodity prices were heading towards historic highs not seen since the food price spikes of 2008, which resulted in murderous riots and export bans across the world.
Late last week, those historic highs were breached. In 2008, corn spiked at $287 a ton; last week, spurred on by drought conditions in the American Midwest, the futures price went to $340 a ton. In 2008, soyabeans hit $554 a ton; last week, a ton was costing just shy of $660. For the moment, the prices of the primary food security crops – wheat and rice – remain down on historic highs, but there are fears that if the corn harvest suffers further, then prices in wheat and rice will follow.
These are not abstract issues for money men and markets. They affect people at the bottom of the economic heap. Right now, for example, there is an acute food deficit problem in Yemen. People are starving in their millions. Children are dying. The problem is not a lack of food. There is food in the country. It is that the economy has collapsed to such a degree and food prices have risen so high that people cannot afford to feed themselves. Aid groups such as Oxfam say they are as likely to be handing out hard cash in Yemen right now as they are food aid.
In Britain, we will also feel these shocks. For example, corn and soyabeans are primary livestock feed and with the Chinese and Indians ramping up their meat consumption the cost is bound to shoot up.
The real issue is that, just as with the dairy industry situation, we have no protection from this price instability because of the behaviour – once again – of the British supermarkets. In the early 90s, the UK was more than 70% self-sufficient in food. Today, many experts believe we are down to just 50% self-sufficiency. The reason: the major supermarkets have been so vicious on prices paid to farmers that huge numbers have left the industry.
Pressed on the issue, the British Retail Consortium, speaking for the multiples, points to a recent report listing the grants they have made to fund studies on environmental sustainability and waste-reduction. This, they say, proves supermarkets are investing in British agriculture. Nonsense. It’s pennies compared to their vast profits and nothing compared to the imperative of paying British farmers a fair price so they can genuinely invest in British agriculture for the future. This may mean price rises for the British consumer, and in a week when we have heard more than we may ever wish to about the boom in food banks, that may sound unpalatable.
But if it doesn’t happen, if Britain doesn’t do more to feed itself, if it doesn’t do more to support struggling sectors such as the dairy industry, we will be left at the mercy of the international markets. The food price rises we would see then would be excruciating.
Be in no doubt: the current crisis in Britain’s milk business is not an isolated incident. It’s a warning.
>>Read the original article by Jay Rayner on the Guardian.