A global issue for farm gate prices?

- Last updated on GMT

Related tags: Milk

UK farming union pleas calling on dairy companies and cooperatives
not to talk down the market may fall on deaf ears, as indicators
from Australia suggest the global economy is dictating farm gate
prices.

The national farming unions of Scotland and Wales, alongside Farmers For Action (FFA), this week called on dairy companies and cooperatives to show commitment to dairy farmers, amid speculation that farm gate prices are under threat. The groups said they will not accept a price reduction based on anticipated market conditions that cannot be accurately predicted.

"Commodity markets are strong,"​ said Wales' NFU vice president Dai Davies. "Mature cheddar prices rose to over £2,400 per tonne, butter prices are stable and there is no exceptional pressure on cream."​ He added that farmers were not prepared to put up with the politics of mistrust that seemed to pervade the industry. "We want a clear signal from the rest of the supply chain that our products are valued,"​ he said.

Australian dairy farmers, who aired similar concerns about the level of payments they receive from dairy companies, were told at a conference last week that the price they receive for their milk is predominantly influenced by international markets. Steve Spencer, a consultant for Victoria dairy farmers, said that the state exported 70 per cent of its milk, with the remaining 30 per cent remaining in its domestic market. Of the latter figure, only 6-8 per cent went into fresh milk, with the remaining used for products such as cheese and butter which were subject to external currency fluctuations.

"Around 92-94 per cent of our milk is directly affected by international product prices. Farm gate prices are not determined by supermarkets, with most milk supplied under contract. The components for manufacturers have hardly changed in the past five years."​ He added that dairy farmers should focus on the factors they could control, rather than being distracted by the myth that supermarkets set farm gate prices. Chris Phillips of Dairy Australia, said that farmers' margins had been squeezed, and cited last year's drought for farmers' short-term debt, as costs rose because of additional infrastructure costs, such as water and electricity.

In the UK, cheese exports rose by 24 per cent in 2003, to 86,000 tonnes, with sales to EU countries rising by 44 per cent.

Related topics: Markets, Pricing Pressures

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