Educating the Veterinary Students of Tomorrow

Milk Prices

History of Milk Prices

In 1933 the Milk Marketing Board (MMB) was set up as a buyer of milk from UK dairy farms. Its aim was to try and reduce the abuse of power by some of the big wholesalers of the time. The MMB pooled all the milk and then marketed and distributed it all together and sold it to the retailers, ie. supermarkets. In this way, although dairy farmers had to sell to the MMB, they were guaranteed a good price for their product, even during uncertain times. It was the middle man between producer (farmer) and retailer (shops), that set a fair price for the farmer. When the 1980’s came along, the EU introduced milk quotas onto farms, which constrained farmers to produce certain amounts of milk (80% of milk demand at the time), unless they bought or leased more quota, obviously at further cost. The MMB became an outdated model and along with government ideologies of mass deregulation at the time, the MMB was scrapped in the Agricultural Act of 1993. The modern twist has been the emergence in power of the supermarkets, which dictate the price they will pay for commodities like milk. With no MMB as the counterbalance, in 2000 our farm's milk price began a drop of 40% in 18 months. The number of dairy farmers in the UK was estimated to be at 25,000 in 2000. In December 2014, the number had dipped below 10,000 for the first time - a 50% fall since 2001 - according to the national farmers’ union (NFU). AHDB Dairy figures for July 2015 show there are now 9,724 farmers in England and Wales.

Current Milk Prices

 Farmers do not sell milk directly to shops. It is collected from farms by a milk processor who then bottles it or turns it into other dairy products such as cheese, butter or yoghurt. The supermarkets then buy from the wholesalers/processors. It is now costing farmers more money to produce milk than the amount they get when they sell it. Figures released by DEFRA for June 2015 put the average farm-gate price - which is the amount of cash farmers receive - at 23.66 pence per litre (ppl), the lowest for five years and down 25% in the last 12 months. However, farmers estimate that it costs between 30 and 32p to produce a litre of milk. Some super-markets such as Tesco, Sainsbury’s, Waitrose, Co-op and M&S have cost-of-production based pricing models in place to ensure that their farmers are paid a fair price for their milk, whilst Lidl, Aldi, Morrison’s and ASDA do not. Some say the Russian ban on European imports of milk and the reduction in demand from China have affected the global milk price.

Low levels of supply across Europe have steadied the current milk price where the average price for December 2017, as reported by DEFRA, fell by 0.9% from November, to 31.66ppl. (http://dairy.ahdb.org.uk/market-information/milk-prices-contracts/farmgate-prices/uk,-gb-and-ni-farmgate-prices/#.WncZ-DKcZsM). Despite all the doom and gloom around milk prices, the remaining UK dairy farmers have an excellent skill base and should be able to compete globally in the future.