5 September 2007

2 minute read

Europe

This is good news for the Soil Association as it kicks off the ‘Wake Up to an Organic Breakfast’ Fortnight.

The only fly in the ointment is that demand for organic milk is now out stripping supply, an increasing factor in the organic marketplace.

“Though the growth rate of organic was held back by a shortage of supply at the end of 2006 and early 2007, it is still moving ahead strongly and advancing at a rate well ahead of the total milk market.”

At a time when milk suppliers have been facing huge financial difficultly and even the large supermarket chains realising that they can no longer force the price of milk any lower and expect their cash strapped suppliers to continue to stay afloat, the organic sector is seeing a combination of excess demand and higher yields.

On average, British conventional dairy farmers are being paid below the cost of production and over 6 pence per litre less than they were 10 years ago, the impact of which is further compounded by the fact that the costs of production have risen significantly in those same 10 years and continue to rise. At the other end of the dairy chain processors have managed to maintain their margins while supermarkets are receiving a larger share for milk returns.

Since the abolition of the Milk Marketing Boards dairy farmers have experienced a significant decline in bargaining power with processors and retailers. This lack of bargaining power has seen the farmgate price for milk decrease from 24.6 pence per litre (ppl) to 18 ppl in just over a decade while at the same time supermarket profits have increased from 3 ppl to 15 ppl. As result of these disparities in milk returns the relationship between farmers and supermarkets has become extremely strained.

Source: Naturalchoices.co.uk