SCOTLAND’S dairy farmers are facing yet more milk price cuts this month and next, prompting a National Farmers Union plea to milk processors and retailers to take a greater share of the costs involved in producing milk – or risk ‘irreparable damage’ to the country’s domestic milk supply.

All the major milk buyers in Scotland – Muller, First Milk, Lactalis, Arla, and Grahams – have now announced milk price cuts to come into force in the coming weeks, despite many Scottish dairy farmers being well into a second consecutive year of milk prices already substantially below the cost of production.

NFU Scotland said this week that too much of the burden of low milk prices has been foisted onto producers, and warned milk processors and those selling dairy products that it is time to recalculate their margins.

Speaking from Brussels, where he was attending European meetings on the dairy crisis, NFUS milk policy manager George Jamieson said: “While we can accept that the collapse in dairy commodity prices is a global issue, there is a strong argument that other parts of the chain are forcing a disproportionate share of weak market prices onto producers.

“Milk processors, while under competitive pressure, continue to use their power of discretionary pricing to manage their margins, as they compete for market share. While at the retail end, there is little sign that consumers are benefitting from some of the weakest dairy markets in living memory as retail prices remain virtually unchanged.

“It may be simplistic, but retail prices for cheddar have only reduced marginally to around £5.85 per kg (equivalent to £5850 per tonne) while wholesale prices are down to well below £2000 per tonne. Regardless of the complexities in cheese pricing, that is a huge margin being made at the retail end,” said Mr Jamieson.

“Those in the dairy supply chain who have the power to exert downward pressure on milk prices must display a greater degree of empathy or rational understanding that their behaviour has very serious long term consequences for supply.

“While we cannot dodge the fact that the market is the market, the consequences of extended periods of low prices must be addressed. There is a fundamental need to share the risk which is currently being carried by the producer, while the rest of the supply chain manages their margins at the expense of those producing the milk.

“Long term food production is too important to leave totally to the market,” he stressed. “A dysfunctional and short-sighted supply chain, if allowed to carry on, will severely compromise primary production.

“Without retailers and processors waking up to the damage they are doing, we run the risk of this prolonged price crisis taking out some of our most efficient and well invested dairy farmers and not just those producers deemed less efficient or contemplating leaving the industry. The dairy supply chain cannot assume this is a producer problem which will be resolved by a natural ‘wastage’ as they may find that there are too few dairy farmers left who are willing to be abused by a supply chain that is no longer fit for purpose.”

For in-depth news and views on Scottish agriculture, see this Friday’s issue of The Scottish Farmer or visit www.thescottishfarmer.co.uk