Carl Mortished, International Business Editor
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The price of milk is soaring worldwide as a drought-stricken dairy industry struggles to meet surging demand for milk products in China and the Middle East.
A doubling in the price of wholesale milk over the past year is creating havoc among food manufacturers, prompting warnings about food price inflation in the UK. Aid organisations have also raised concerns about the depletion of government stockpiles of milk powder.
In the UK, the price of cream has risen 23 per cent over the past year and dairy organisations say that cheese prices will have to rise this summer.
The continuing drought in Australia, which has crippled the country’s dairy output, has raised the wholesale price of skimmed milk powder by 60 per cent in six months. Over the past year, the cost of skimmed milk powder, used widely by the food processing industry, has soared from $2,000 per tonne to $4,800 per tonne.
Butter is also becoming much dearer, rising from $1,800 per tonne to $2,550 per tonne, according to figures from the Milk Development Council.
Changing diets and rising living standards in Asia, notably in China and the Middle East, have caught international milk processors on the back foot. Greater wealth is leading to a change in the Asian diet, explained Carmen Suarez, chief economist at the National Farmers Union. “There is population growth and higher incomes, which leads to higher consumption of animal protein.”
So rapid has been the escalation in demand that the EU’s milk surplus has dried up and the butter mountain has been flattened. Historically, the European Commission has given European producers subsidies to sell dairy products into the world market.
“The markets have been so strong there is no amount [of milk and butter] in intervention,” Ms Suarez said. “For skimmed milk powder the EU has been able to export without subsidies for a year.”
While the disappearance of EU food mountains may be welcomed, aid agencies have given warning of the impact on the world’s poor. Much of the world’s stock of milk powder is sold to poorer countries.
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Gareth Davies knows what he's talking about. As a result of this country implementing such standards on the production of meat and milk in this country, we should only import meat and milk from other countries which have the same standards. In 1995 dairy farmers were being paid 24.4p/l compared to 17.7p/l nowadays - the supermarkets need to put the price of milk up to customers and stop taking so much of the profit.
In 5 years time I see that we will be importing the majority of our milk from non-EU countries and who knows what will be in it and how old the milk will be!
Ieuan Williams, Uxbridge, UK
I am more than willing to pay more for milk at the supermarket but how can I be sure that the money will go to the farmer? Please advise me of any campaign or any product labelling that would help me to help UK dairy farmers.
I have been surfing for some time now and found no way of actually helping despite there being news items about the issue and now a television public service ad.
Geraldine Wall, Birmingham, West Midlands
Between June 2002 and June 2006 the average milk price paid to farmers dropped 1.3% to 18.4ppl. In the same time the average retail milk price based on a 4 pint polybottle rose 19.5% to 49ppl.
We could produce all the dairy products we need at home under the highest standards of quality, traceability and welfare. BUT
Production is dropping all the time due to; 1) the greed of robber baron supermarkets who have a stranglehold on British food purchases . One of the big supermarkets alone now make more profit than the whole of UK agriculture, 2) the rampant infestations of beauracracy plaguing farmers. E.g farmers have to keep a medicine book giving records of all treatments. Fine, but why do five different people have the right to inspect it when one qualified person would be enough?
Mark Holliday, Appleby, Cumbria
Unilaterally the EU has already offered to abolish all Agricultrual export subsidies for a WTO agreement and when it does it should abolish the current 50,000 tonnes New Zealand Butter tariff free import agreement in place since the UK joined the EU.
Antipodean sunshine economics seem about to score an own goal. Australia being one of the worlds largest exporters of greenhouse promoting coal may well be about to scupper their dairy industry by drought if that raise UK milk prices - so be it.
Worse still, antipodean economics demand an all grass diet that allows cows to produce twice as much methane per pint of European milk. Methane is 21 times more powerful than CO2 as a global warming agent. That same milk is then turned into milk powder and cynically exported at huge food mile cost to feed human babies and dairy calves that would be better fed their natural mothers whole milk.
Stephen Brooks, Falmouth, UK
Most of the UK is actually farmland. What would make more sense is if supermarkets stocked locally produced food, including milk and other dairy products. And if air transport was taxed like other forms of transport, thus ending that particular subsidy.
Jessica, Berkshire, UK
Well said Keith Saunders. Yours is the one question to which we humans continually turn the blindest of eye of all. Yet the simple truth is that If we continue with the present trend of multiplying ourselves exponentially, totally unchecked, ALL species (including ourselves) do not, I am afraid, stand much of a chance at all in the longer term. Maybe as humans we are eternally optimistic? Hence we inwardly believe a solution can and wioll be found? I prefer to think it is because we are just too afraid to take a long hard look at where we are all headed. Or maybe the vast majority alive on the planet think the ever increasing population and resultant climate change with all its various and inevitable implications will not affect us in our lifetime, so why bother about it now?
Rick, Norfolk,
Although I am not a farmer, as a chartered surveyor with some experience of land agency, I can assure the readers that we in the UK have probably the most efficient agricultural industry in the world and one that is far more welfare orientated than competing overseas countries.
The problem that we have in the UK is that we have been obsessed with a cheap food policy irrespective of welfare standards and the farmers are dictated to in terms of price by the super-markets who quite frankly do not care where food is sourced from as long as it is cheap.
Many of the UK's dairy farmers who are working 7 days a week 52 weeks of the year have to survive on 18p per litre despite the costs of production being in excess of this figure in the majority of cases.
In 5 years time we will be lucky if we have a farming industry left and then the food suppliers from abroad will dictate to us. Englands "green and pleasant land" will become a wilderness.
Gareth Davies, Cowbridge, Vale of Glamorgan
The EU has offered to abolish all Agricultural export subsidies for a WTO agreement – when it does it should abolish the current 50,000 tonnes New Zealand Butter tariff free import agreement in place since the UK joined the EU.
Antipodean sunshine economics seem about to score another own goal. Australia – being one of the worlds largest exporters of greenhouse building coal may well be about to scupper their dairy industry by drought – and if that raise UK milk prices - so be it.
Worse still, antipodean economics demand an all grass diet that allows cows to produce twice as much methane per pint of European milk. Methane is 21 times more powerful than CO2 as a global warming agent. That same milk is then evaporated into milk powder and exported at huge food mile cost to feed human babies and dairy calves that would be better fed their natural mothers whole milk. Time for Fronterra – the monopoly buyer and seller of NZ milk and milk products to cease its anti competitive and unethical selling practices.
Stephen Brooks, Falmouth, UK
Llooks like we will be back to the 1970s sit com in the "GOODLIFE" with cows in the garden.!
Does this mean houses with gardens will be worth more ?
Cows,sheep,hens and a horse to avoid the congestion charge.
Food inflation is at 8% what shops does the BOE use and milk is a raw material in so many other foods.
Come on BOE will my tea have to be with out milk to save money?
Base rates at 6.5 % by 2008 and svr mortgage at 8.5% by next jan.
So many mortgages are on a yearly review and thus the last increases are not in the real world figures yet.
Recession 2008?
jay, Manchester , uk
I've often read that the Chinese are unable to digest milk and that it is therefore in effect a toxin to them. Is there anyone out there of a scientific bent who can explain this?
Adetola Obembe, London, England
No point in telling it to the French... large land mass populated not entirely but hugely by small farmers often farming below 200 acres... these small farmers do not want to sell up, don't want to join wioth others and the government won't stand up to their protests... of course the bizarre thing is the lions share of the subsidies are paid to large farms who generally don't need it to be profitable.
Subsidies should have been negotiated two years away.. instead Blair missed that chance (theres a surprise and instead gave away part of the Uk's rebate rights as part of a stunningly poor deal).
Subsidies may go but not soon and not before Sarkozy has made some impact on frnace... he certainly won't take on the farming lobby without a couple of years of reform success behind him.
Of course if we are worried about food supply we could perhaps re-farm some of the 10% set aside we have or the field boundaries etc. Theres plenty of capacity there yet.
abharrisson, london,
Steve, distorting markets and inhibiting competition is what the EU was created for.
Ian B, Reading,
How many more pieces of information are we going to ignore before we realise that the current explosion in human population numbers in unsustainable. Efforts need to be put in place to firstly stabilise then reduce the human population to manageable numbers of around 3 thousand million rather than the near 7 thousand million we are approaching. Lets give the others species that share this planet with us a fighting chance of survival.
keith saunders, Bromsgrove, UK
Steve, Try telling that to the French!
Toby, Malaga, Spain
Maybe now would be a good time to stop the market distorting practice indulged in by the EU for so many year of providing subsidies to dairy farmers? Not only do they fail to promote efficiencies food production, they also act to disadvantage efficient producers. While the EU may well have benefited in the short term by selling down the butter mountain, they would benefit still more by stopping the subsidies racket in the longer term. Efficient producers, such as New Zealand, can then produce efficiently and compete fairly, and perhaps in turn the EU can invest the money no longer diverted into subsidies into research and development, to grow employment in areas where you have real expertise, and not subsidies!
Steve Carr, Swannanoa, New Zealand