MILK PRODUCERS with farmer-owned co-operative First Milk face a punitive new pricing structure intended to knock the current excess dairy supply back into line with demand.
Kicking in from April 1, the new A and B quota system will see milk produced within litreages that First Milk can cope with making between 20.87p and 20.5p per litre - while litres surplus to that will get a 'B' price of between 16p to 18p from short-term sink markets.
The co-op has set its A price limit at 80% of its members' historical production - so the reality is that, at least until the market recovers, one litre in every five produced by First Milk's farmers is going to earn that lesser B price.
The co-op's chairman Jim Paice said: "There continues to be marked volatility in global dairy prices. Nevertheless, the recent movement of market indicators means that we are cautiously optimistic that the trend for future dairy prices is, at long last, a more positive one.
"However, there remains a number of uncertainties. For example, although the latest Global Dairy Trade figures have been encouraging, as yet, they have not fed through to milk prices and many buyers are awaiting the outcome of the forthcoming spring flush. We will continue to monitor market indicators closely and build these into our decision-making on milk price."
Market volatility such as that now afflicting First Milk is a challenge facing the whole British dairy industry, according to a new report launched by Westminster's Dairy All-Party Parliamentary Group this week.
The report, entitled 'The sustainable competitiveness of the British dairy Industry', outlines a number of steps the government might take to safeguard the future of the industry, including seeking an immediate review of intervention prices by the European Commission, the development of futures markets, the development of export opportunities and mandatory country of origin labelling.
Dairy APPG chairman Neil Parish MP said: "Volatility has been an inherent feature of the dairy market for a number of years and it is one of the greatest challenges facing the dairy industry.
"The extreme volatility seen over the last few months is affecting the whole supply chain but the industry is confident of an upturn during the course of the year."
Dairy UK chairman Billy Keane commented: "Dairy UK welcomes this report which recognises some of the crucial steps that the government need to take to support one of the UK's most essential industries.
"The industry has been going through some difficult times since last summer but we are confident that things will improve over the course of the year.
"It is also crucial that we address misconceptions about dairy, especially from a nutritional point of view and really focus on educating people about how nutrient-rich milk and dairy products are," added Mr Keane.
- For in-depth news and views on Scottish agriculture, see this Friday's issue of The Scottish Farmer or visit www.thescottishfarmer.co.uk
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