Over recent months, the Farmers’ Union of Wales has met with many major UK retailers to highlight the current and future concerns of the Welsh dairy sector following the sustained downturn in dairy commodity prices.
“Sustained low prices, coupled with the recent review of the dairy sector in Wales and the abolition of milk quotas in April, created a perfect storm and presented a prime opportunity for the union to actively discuss dairy farmer concerns and aspirations with UK retailers,” said FUW senior policy officer Dr Hazel Wright.
Many of the major retailers have attempted to foster public loyalty by publicising the prices paid to farmers on retailer aligned contracts and the union acknowledges that these prices tend to be at the higher end of the league table.
However, in Wales, such contracts account for just 4 percent of the milk produced and this is very low compared to the 25 percent of milk production that is on retailer aligned contracts in the UK. With this in mind, the FUW has been a strong proponent of expanding the Groceries Code Adjudicator’s powers to cover all dairy producers and not just those on retailer aligned contracts.
During discussions with retailers, the union aimed to ensure that time was given to highlight the impact of retailer price battles and the associated effect that such aggressive competition has upon Welsh and UK producers.
Dr Wright stressed that price wars remain one of the most prominent tactics in UK retailer armouries but warned that this tactic inevitably leads to important and staple products, such as those involving dairy, being used in a bid to enhance market shares.
“It is imperative that Welsh dairy producers are not expected to enlist in retailer price battles. Is it not, and never has been, the job of the producer to fund supermarket price cuts or to enhance a retailer’s market share. Sacrificing producers to a retailer price war can only function to further break an already fractured supply chain,” added Dr Wright.
Alongside concerted lobbying on the powers conferred to the Groceries Code Adjudicator, the FUW would also seek to ensure that the Competition and Markets Authority (CMA) takes greater responsibility for investigating and reviewing the UK dairy markets in order to improve the way in which the sector works for both producers and consumers.
“The CMA is the UK’s lead competition and consumer authority and has the power to scrutinise the functioning of markets for the benefit of businesses and consumers. Much of the work of the CMA has focused on issues pertaining to the payday lending market and the union believes that the groceries retail market would benefit from similar scrutiny,” said Dr Wright
“Whilst the FUW found the meetings to be informative and constructive, there remains much work to be done before the UK dairy supply chain fully works to the benefit of Welsh producers. The union hopes to continue its working relationship with UK retailers in the future and looks forward to being an active and prominent member of the Welsh Dairy Leadership Board that was mooted in the Welsh dairy review,” added Dr Wright.