Milk industry's middle men come under fire in price war

By Rick Pendrous

- Last updated on GMT

Milk processors Arla, Dairy Crest and Robert Wiseman, which supply Britain's major multiples, have come under sustained flak over the past month for their role as 'middle men' in cutting the price paid to dairy farmers for milk to below the cost of its production.

As the British Retail Consortium (BRC) sought to deflect the blame for the low prices away from retailers and on to processors' shoulders, farmers continued to take their protests to processors plants across the country. Milk prices are sometimes 5p a litre below the cost of production, which is completely unsustainable, argue farmers.

Processors responded by pointing out that they have been constrained in what they can pay farmers for raw milk by the fall in world cream prices. Since most milk these days is sold as skimmed or semi-skimmed, processors need to find outlets for the cream content of the product.

The BRC's food policy director general Andrew Opie took to the airwaves to stress the low percentage of the UK's total milk production that supermarkets handle, pointing out that the vast bulk went for further processing. He argued that only 50% of the milk produced in the UK was sold in bottles and cartons and, of this, only a proportion through supermarkets, with the rest going through independent convenience stores and garage forecourts. He added that a small number of farmers with direct supermarket contracts approximately 11% were paid a higher price for their milk.

Despite this, a number of supermarkets came under criticism from farmers, celebrity chefs and the Royal Society for the Prevention of Cruelty to Animals for using milk as a loss leader to drive footfall within their stores, which would ultimately lead to lower animal welfare standards. Asda, Morrisons and The Co-operative came in for particular criticism, although they have all since announced price rises. Food minister Jim Paice subsequently held discussions with the processors in an attempt to resolve the issue.

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