A change of mind-set is needed on the part dairy processors if market stability and a fair milk price is to be achieved, according to a leading sector consultant.
It is time for processors to stop looking at the farm-gate price as a flexible bargaining chip when selling milk, but as a primary cost top secure supplies that meet their volume and quality needs, said Nick Holt-Martyn, of The Dairy Group.
“The getting more-for-less mantra that is pinned above every retail buyer’s desk needs to change – the supply chain needs to be able to profit from the relationship,” he said. Mr Holt-Martyn, whose consultancy is based in Taunton, said the furore over the proposed slashing of payments – and the successful outcome – may prove to be a turning pint in the price-setting mechanism. But for some the cut is only suspended.
The sharp cut in liquid milk payments was caused by “processors falling over themselves for market share”, he said. “Processors need to look to service and efficiency, not price, as their point of differentiation.”
The real driver of liquid payments to the farmer was what processors needed to pay to secure supplies. He said: “The widespread acceptance that the cost of production should set a bottom in the price-setting process should be used by the Government to shame the supply chain into playing fair to all suppliers. Fair trade starts at home.”