Dairy supply chain margins under scrutiny

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DairyCo the dairy farmers organisation, has called for monitoring of farm gate prices in its latest Dairy Supply Chain Margins report, which reveals that while retail margins have risen, margins for producers have fallen.

Senior analyst, Patty Clayton, said: “Our report shows that farmers’ share of the retail price of milk and Cheddar cheese has decreased in the past year. This appears to be due to two main factors; an increase in the retailers’ gross margin and a lower farm gate price.  Despite a recovery in commodity markets, the farm gate price remains at a low level.”

The report shows that retailers had a gross margin of 34 per cent on liquid milk in 2009/10, up from 29 per cent in 2008/09 and from 20 per cent ten years ago. But at the processor level, gross margins fell for both liquid milk and mature Cheddar but remained unchanged for mild Cheddar.

DairyCo is a not-for-profit organisation working on behalf of Britain’s dairy farmers. It is part of the Agriculture and Horticulture Development Board.

The report says that what should now be monitored “is the time it takes for the farm gate price to adjust to improving market conditions, and whether it will attain a level which will provide dairy farmers with a sustainable return.

“This is needed to allow for investment in their businesses to ensure they can continue to supply milk in an efficient and profitable manner.”


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