Dairy price wars kicking-off in UK and France

By Stephen Daniells

- Last updated on GMT

Related tags: Cheese, France

Price cuts by British supermarkets and French cheese makers may be driving dairy industries in their respective countries towards a milk war.

British supermarkets

The National Farmers Union (NFU) said yesterday that supermarkets and not supplier should bear the brunt of price issues in the UK. The statement followed an announcement by Tesco of milk price cuts.

The cuts were quickly followed by other supermarkets that reacted to Tesco’s move “in a tidal wave of ruthless discounting”​, said Gwyn Jones, chairman of the NFU’s dairy board.

“Even in today's industry climate, with milk in short supply, costs going through the roof, a favourable exchange rate, and the need for further price increases, retailers have demonstrated their unnerving ability to rock the stability of the industry overnight,”​ said Jones.

"This time, however, the industry will be ready. We will not lie in wait for the inevitable margin slashing that we still bear the scars of.

“Having proper contracts that bring certainty to the way milk prices are determined, that require proper negotiation between both parties to agree change and which, ultimately, create a fairer balance of power in the supply chain, will protect farmers from becoming the hapless victims of a clash of the titans price war,”​ he said.

Emmental from Brittany

According to an article in French daily Le Monde​, Entremont Alliance, number one in the production of industrial emmental in France, will pay only €0.30 (₤0.24) more per litre in the third trimester of 2008 than in the same period a year ago. Dairy producers wanted a €0.49 (₤0.39) per litre increase.

This equals a price of €311 (₤245) per tonne.

Entremont said financial pressures for raw materials were behind the price revision, according to Le Monde​.

The industry’s representatives in France were quick and strong in their reaction. The Organisation of Milk Producers’ president, Jean-Louis Naveau, was quoted by the newspaper as saying that Entremont were “robbing”​ the milk producers.

“Entremont has difficulties? We don’t want to know. It’s not up to us to pay for broken pots,”​ he said.

Cheese issues

European cheese production has faced its fair share of difficulties over the last 12 months.

Last November, Campina revealed it was offloading production of its goat's cheese production to the joint venture group Amalthea van Dijk to concentrate on making cow’s milk-based goods.

In September, Arla Foods said it was cutting cheese production by 6,200 tonnes gong into 2008 in a drive to better deal with a dwindling global supply of raw milk.

The group said that production of edam, danbo, fontal, havarti and rindless cheese were all reduced as part of the focus.

Related topics: Markets, Ingredients, Pricing Pressures

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