Dissatisfied dairy farmers offered alternative milk outlet

Dissatisfied dairy farmers are being offered an alternative outlet for their milk from a new milk broker.

Capital Milk, launched this week, hopes to offer producers a better deal by selling milk to a range of customers on a variety of short and long-term contracts.

Penalised

The Hampshire-based business has been set up by independent consultants Chris White and David Lunniss.

They said some existing milk contracts were not in the best interests of farmers because they tied them in for long periods of time and penalised those who handed in their notice.

Forced to sell

“Farm gate prices fell from 24.5ppl to 18.5ppl in the ten years from 1995, while processor gross margins increased by 8%, and retail gross margins increased ten-fold from 3% to 28%,” Mr While said.

“During this time farmers have been forced to sell milk below the cost of production.

Secure better returns

“We want to use our experience to help secure better returns and a long term profitable future for everyone across the whole dairy supply chain – but particularly for farmers.”

Mr White said the business would start trading on 1 Oct, but would not say how much milk it was hoping to attract.

‘Hidden costs’

Arthur Reeves, head of milk buying at Dairy Crest, said he understood why farmers were frustrated, but said setting up an efficient milk-broking business was not easy.

“It’s easy to talk about but it requires a lot of expertise and there are lots of hidden costs,” he said.

Options for farmers

In the North of England, former Arla Foods supplier David Barnes, who has set up his own milk supply business, is set to speak at a meeting on Thursday to discuss the options for farmers unhappy with their current milk buyer.

Strutt & Parker’s Paul Dennison, who will chair the meeting, said 150 farmers supplying processors including Arla Foods, First Milk and Dairy Farmers of Britain, had accepted an invitation to attend.

Unique situation

“At present it is a sellers market for dairy commodities, which is underpinned by a rising global demand.

“This is a unique situation for dairy farmers and you must not sell your milk too cheaply,” said Mr Dennison.

‘Top price’

Peter Walker, head of milk buying at Arla Foods, said he was aware of the meeting and it was up to farmers to decide who farmers sold their milk to.

“But we will be paying a top price from October,” he added.

Informed decisions

Tom Hind, NFU chief dairy adviser, said: “Whilst we cannot advise dairy farmers how and to whom they should sell their milk, they must carefully study their contractual obligations and make informed business decisions.

“Being able to place milk at short notice is great when markets are strong and supply tight, but is a nightmare when demand falls and supply increases.”