Dairy Crest Direct (DCD), which represents 1,350 Dairy Crest suppliers, are calling for a minimum price of 27ppl to be delivered as soon as possible. In a press release, DCD highlights the rising costs of production which are showing no sign of slow down - wheat prices for instance reached the record high of £200/tonne before Christmas. According to a report prepared by Kite in November, production costs have increased by between 1.5 and 2ppl over the 2010/11 winter period. The Promar cost tracker compiled for Tesco put the total cost of production at 27.68ppl and is going to be reviewed in mid-January. This combined with static milk prices on the liquid non-aligned contracts is leading to reduced margins and 'many dairy farms now operating at a loss' according to DCD chairman David Herdman.
As DairyCo also highlighted a number of times, DCD stresses that commodity markets are buoyant and well above farmgate price which should enable the supply chain to return a higher price to farmers. AMPE for example stood at 28.1ppl in December and recorded a record annual average in 2010 as can be seen by clicking here. The press release concludes that without a more sustainable milk price, the sustainability of the supply chain will be critically undermined.
The press release can be downloaded by clicking here.