High milk prices vital for long-term dairy stability, says industry

By Neil Merrett

- Last updated on GMT

Related tags: Dairy, European union, Dairy uk

The continued price hikes faced by European dairy processors for
milk will offer an important opportunity for encouraging further
investment and ensuring product sustainability in the industry, a
UK dairy association has claimed.

The average price paid for milk within the 25 EU member states, excluding Romania and Bulgaria was up by 12.9 per cent last year to a price of 2.42 pence per litre (PPL) compared to the same period during 2006, according to new figures by DG Agri. Higher production costs for farmers and processors have led some dairy groups to express concern over the direction of the European Commission's agricultural reforms plan, which aims to encourage a market-led and not government-supported industry. However, a spokesperson for industry body Dairy UK told DairyReporter.com that Europe-wide farm price increases for milk were vital in ensuring long-term industry sustainability. "High prices throughout the dairy chain are an opportunity, encouraging investment and promoting sustainability,"​ he stated. "And while cost pressure remains an issue in factories as it does on farm, the dairy chain appears to be keeping this problem under control."​ The Dairy UK spokesperson said that surging demand for dairy products was the result of changing global dairy market. "Farm gate milk prices rose acrossEuropelast year in response to soaring dairy commodity markets. An increasing taste for dairy products inAsiaand slowing global output growth led to a scramble for supplies in 2007,"​ he added. Despite continued uncertainty over the future price of milk in markets like the UK, the spokesperson said that the entire dairy sector in the country had reasons to be optimistic. "With consumption of dairy products on the rise, demand for dedicated supply chains from retailers and a wealth of product innovation, theUKdairy industry is well positioned for the future,"​ he stated. Despite a 15.8 per cent rise in farm gate prices for the UK alone, amounting to 2.68 PPL, DG Agri found that the UK was currently only ranked the 17th​ most expensive milk market in the bloc. Cyprus, despite relatively low annual price growth of 3.1 per cent during 2007, posted the highest average price amongst the EU-25 of 27.57 PPL. Lithuania, which underwent a 20.1 per cent hike in the average price paid to their farmers for milk last year, still posted the cheapest rates for the product of 16.20 PPL.

Related topics: Markets, Fresh Milk, Pricing Pressures

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