Posted: 15/08/2015 at 07:27
The problem is, it's not market forces that are determining the price of milk at the moment - it's the supermarkets using milk as a loss leader. Everyone buys milk, most buy it from a supermarket. Have you ever wondered why milk is always in an area furthest from the supermarket entrance? It's because it's the one thing that people 'just pop in' to get, but by making their customers walk past everything else in the supermarket to reach it, no one ever leaves with just the milk they went in to buy.
Also a problem totally unrelated to 'market forces' is the sudden drop in demand for British cheese due to the tit for tat trade sanctions going on between Russia and the EU. Russians love Cheddar cheese - simply love it. The British farmer had upped production to meet this demand but now, because of a political decision the demand has disappeared. http://www.independent.co.uk/news/world/europe/russia-has-just-flattened-10-tonnes-of-cheese-10443704.html
Regardless of the rights and wrongs of the political situation, Putin understands the importance of making his country as self-reliant as possible in food (that's one element of the strategic importance of the Ukraine, for long known as the breadbasket of Europe - the other element of course is that Sevastapol is the Russian fleet's only winter access to western waters). Britain used to understand the importance of being as self-reliant as possible in food - but this is no longer true - again, a political decision and nothing to do with 'market forces'.
The Europe-wide drop in demand for milk due to the loss of the Russian market for cheese has flooded the market with cheap milk. There has also been an unexpected drop in demand for milk products from China due to the economic situation there.
The production of milk involves long term investment and farmers cannot just stop or reduce the amount they produce - this puts them at the mercy of the supermarkets - the farmers have no choice but to accept whatever the supermarkets will pay them. Even if they decide enough is enough and they'll go out of milk production, who is going to give them a fair price for their cattle, equipment and land when dairy farmers can't make money. If they sell up they'll not make enough to pay back their mortgages/bank loans etc. They're stuck between a rock and a hard place.
The only way that dairy farmers can hope to make money at the moment is to produce more and more milk from the cows, land and equipment they've got - this is what leads to the practices described here
Several very good lettersin the papers today but this one addresses the subject from a slightly different angle
• I am appalled at the recent string of protests over falling dairy prices, ........................................despite pushing cows to the limit of their productive capacity and receiving huge public subsidies, it seems that farmers are still unable to turn a profit on milk. This clearly demonstrates what an unsustainable industry dairy farming is.
Ben Martin's piece is simplistic and disingenuous in the extreme.
He should be arguing for higher prices for milk to enable farmers to return to traditional and less intensive methods of milk production - but he's jumped on the bandwagon of 'let's slag off the wicked