The milk supply chain in the UK is broken but at last we have recognition of this at the highest level and a stated willingness to find a solution.
Yesterday the First Minister Alex Salmond expressed his understanding of how farmers were feeling and said the status quo, in which most dairy farmers are not paid enough to cover the costs of production, was unsustainable. Not only that, a UK ministerial meeting this weekend will look in detail at what can be done to help the farmers.
It is difficult to know what kind of solution will emerge from this meeting. Certainly the idea of a fixed price for milk is unlikely to win any political support but action short of direct interference in a free market is needed. Thousands of dairy farmers have left the industry and if this disastrous collapse of an important industry is to be stopped, a way of making milk pay for producers must be found.
The farmers who are at the sharp end have been blaming the dairy processors and the supermarkets and in the last few days have been protesting at the gates of Robert Wiseman, Arla and some of the big supermarkets. This kind of pressure, and that of concerned consumers who refuse to buy milk from certain retailers, is likely to yield some results. Indeed the Co-op announced yesterday that it is to increase the price it pays to farmers, which is a welcome development.
There have been some other positive signs. Supermarkets such as Marks & Spencer and Sainsbury's appear to have a good working relationship with some farmers and pay a fair price for liquid milk, but this represent only a part of the total market and, as a whole, the supermarket buying-block wields a colossal pressure driving the price down. The meeting of the farming ministers this weekend must look at how this influence can be re-balanced in favour of the farmers; in particular, they should look at how to facilitate contracts that allow farmers to move their milk supply at shorter notice and require supermarkets to give more notice of price drops.
The question is how such changes can be encouraged. A voluntary code of conduct has already won some support and it is a starting point but the fear would always linger that the supermarkets would be able to ignore it with impunity. Some supermarkets have already demonstrated they can move in the direction of the farmers; perhaps they would be able to move further and subscribe to a code with some sanctions.
Whatever emerges, the current situation is no longer sustainable. There may be cheap milk in the shops but there is a race to the bottom that is threatening not only an important industry but will, if unchecked, threaten the supply of milk itself. This weekend's meeting of farming ministers must begin the process of finding a solution. They don't have much time to do it.
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