New milk formula 'will offer true value'

A BOLD initiative aimed at breaking the chronic imbalance in the milk price chain was launched yesterday with dairy farmers claiming the proposed pricing formula would not only bring more stability and fairness into the equation but would also ensure a long-term future for the dairy industry.

Speaking at the English Union headquarters in Warwickshire to a gathering of milk producers from all over the UK, NFU Scotland chief executive, James Withers said there was a need to move the whole milk debate beyond the "same rhetoric and action that has dominated dairy politics for more than a decade".

The proposal which will be the basis for a series of producer meetings throughout the UK in the coming weeks uses two established and independent market indicators to form the basis of setting the milk price for producers.

The Milk for Cheese Equivalent price is currently used as the benchmark for milk going into making cheese. The Actual Milk Price Equivalent is based on the price that processors have to pay for milk going into butter and milk powder.

By using data from these two figures and promoting a transparent pricing formula from them, those promoting the new idea believe they can take the industry away from the current never-ending wrangle on farm-gate prices.

Withers, who had earlier commented that he believed the UK milk industry was at a crossroads with producer numbers falling and frustration over existing supply arrangements, added: "There is an overwhelming appetite for change and we believe this should galvanise every single dairy farmer who is tired of the status quo."

Union vice president Allan Bowie described the proposed formula as a "fair and reasonable starting point to set a platform for the market".

It would move up and down but it would be driven by market fundamentals.

The union believes their proposal reflects the momentum behind current EU proposals for stronger milk contracts with transparent pricing mechanisms. In addition, it would also address some of the dysfunction seen in the grocery market, as highlighted by recent Competition Commission investigations.

However, Bowie qualified that comment by saying the proposal did not in any way remove the need for a supermarket adjudicator.

Kenny Campbell, a dairy producer from Dumfriesshire who is the union milk committee chairman, warned producers that in no way were they to think of the suggested idea as a guaranteed smooth ride in terms of the farm-gate price received by dairy producers.

"It will not protect anyone from market realities. Some months will be better than others.

"However, the critical element to this initiative is that the price produced by the formula will represent the true value of the product, reflecting a supply and demand dynamic that UK milk prices have failed to recognise over the last decade."