On Wednesday, angry UK farmers will meet in London to discuss the "crisis" in the country's milk sector after a week of price cuts from processors including Dairy Crest, Robert Wiseman Dairies and Arla Foods.

Farmers argue the cuts have meant they are now receiving less than it costs to produce milk and there is talk of "action" - with some calling for milk to be withheld and others talking of disrupting supplies during the Olympics.

It is easy to empathise with farmers. Milk farming has hardly been the most profitable of professions. Thousands of farmers have stopped producing milk over the last decade. The latest cuts will put even more pressure on producers already at breaking point. Disruption to supplies could be an effective tactic - milk producers in France have had qualified success in the past - but milk down the drain means money down the drain and it will be a brave farmer that swallows that cost when times are increasingly tight.

However, the processors' stance is, to some extent, understandable. One dairy processor, Robert Wiseman Dairies, said increasing production of cream, combined with falling demand for the product, had hit prices, meaning it had less money to pay farmers for milk. Dairy Crest, meanwhile, has long faced pressure on the price it receives for milk from some customers, notably in what is called the "middle ground", which includes local authorities, schools and independent retailers.

Nevertheless, in 48 hours, farmers now dealing with the "crippling" price cuts could shed more light on how they plan to react. just-food will be there to gauge the strength of feeling and report on what could happen next.

Meat as well as milk grabbed the broader UK business headlines last week. Dutch food group Vion announced it plans to close its meat plant in Scotland, putting over 1,700 jobs at risk. The news stung Scotland's politicians into action. A taskforce, including representatives of the Hall's of Broxburn site, union officials, politicians and members of the meat sector, was set up to look at the future of the plant. First Minister Alex Salmond met Vion management and, although he said the taskforce would work "tirelessly" to "help deliver a positive economic future for the workforce and community of Broxburn", he acknowledged the "pressures on profit margins" in the sector.

Some industry watchers point to UK retailers. Sukhdev Johal, a researcher at the University of London, says there is a "trader mentality" among supermarkets that leads to fluctuations in demand, which makes production inefficient and limits capacity utilisation, resulting in losses. "The striking thing is that pig meat consumption is actually rising but without supermarkets guaranteeing continuous demand for processors, an outcome like that of Hall’s will continue," Johal told just-food last week.

However, not everyone in the UK meat sector is suffering. Cranswick, which makes products including fresh pork, sausages and bacon for UK retailers, saw high input costs put pressure on margins in the first half of its financial year but recently reported a "record" second half. Why should companies like Vion be struggling while the likes of Cranswick prosper? In an interview with just-food, Cranswick CEO-designate Adam Couch put some of the company's recent success down to innovation at the premium end of the market. "Quality will out at the end of the day and even in difficult times people want to eat quality food," he said.

There is no doubt there is too much capacity in the UK meat sector and, with suppliers facing retailers that in turn are trying to attract cost-conscious consumers, it is clear some businesses and plants may face closure. But there are opportunities; it just may be that, for this Vion factory in particular, the writing could be on the wall.

Until next time...

Dean Best
Managing Editor
Web: http://www.just-food.com
Email: editor@just-food.com
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