Supermarkets called in to see minister over milk price deal

Farming minister Jim Paice will next week 'call in' supermarkets in a bid to pressure them into agreeing better terms with dairy farmers and into bringing an end to the 'milk crisis'.

Recent weeks have seen farmers from around the country protesting at cuts to the price they are paid for milk, which they claim is forcing them to the edge of bankruptcy.

The industry has been trying to reach agreement on a code of conduct to guide transactions between supermarkets, food manufacturers and farmers, but has so far failed.

At a meeting, expected to take place on Wednesday in Westminster, Mr Paice will ask supermarkets to make greater efforts to finalise the deal, while also asking them to think about how they can help maintain the UK's capacity to produce basic foods.

Mr Paice told the Eastern Daily Press yesterday: 'These price cuts are a severe blow for dairy farmers.

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'Government cannot and should not set prices but I will do everything in my power to get all levels of the supply chain to make the real changes needed to guarantee the industry's long-term future.

'Farmers and processors need to work together through an industry code of practice on contracts, and retailers have to help shift the focus away from short-term practices which are completely unsustainable.'

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Last week 2,500 dairy farmers gathered in London at a protest to raise awareness of the problems they face.

They blame supermarkets who they argue have decided to use milk as a 'loss leading' product; meaning they cut prices unprofitably low to get customers in.

However the retailers, say farmers, do not absorb the loss themselves, instead using their strong market position to demand ever cheaper prices from farmers.

MPs discussed in the House of Commons this week the emergence in some supermarkets of a deal to buy four pints of milk for around a pound.

Supermarkets have argued that they have a responsibility to keep prices low for consumers who are struggling to make ends meet during the recession.

However, shortly before its managers were to give evidence to MPs running an inquiry into the matter this week, one of the supermarkets accused of running the four-pint deal, ASDA, agreed to increase the price it paid farmers for milk by 2p per litre.

Meanwhile the Co-operative Group, another leading British retailer, also has announced an increase, pledging to boost the amount it pays farmers for milk to 29p per litre.

Food manufacturers too have been blamed, with firms like Dairy Crest recently announcing a 1.65p per litre cut in the price it would pay for milk; a move which followed a 2p cut in May.

The National Farmers' Union points out that the price many farmers get for milk does not now cover the cost of production, but firms like Dairy Crest say they too are suffering financially.

However, Mr Paice has warned that if the industry does not come to an agreement on how to stabilise prices then the UK's capacity to produce milk would be permanently damaged.

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