Sustainable Milk Supply

The price of milk has become a political football as farmers get vocal about the low price they are being paid. The situation has come about because of a blinkered reliance on market forces without bringing in other important factors such as long-term health of the dairy industry and the sustainability and security of supply. These are important factors not to be dismissed lightly, but adherents of conventional economics argue that it should be left to the market. This is plain wrong. The farmers deserve a response based on common sense, sound policy and economic viability. The order of analysis is first ‘common sense’ leading to ‘sound policy’ and finally a check of ‘economic viability’.

The simple conventional economic model has consumers at the top selecting the cheapest milk supported by supermarkets seeking to attract more customers and driving a hard bargain with the suppliers.  At the bottom, the farmers have to accept whatever price the buyers are willing to pay with the middlemen, of course, taking their share. Market forces bear most heavily on the party with least power; in this case it is the farmers.

It used to be possible to manage a herd of 60 cows and make a living in the UK. Now a herd needs to be ten times as large to reap the economies of scale to generate a reasonable profit. The problems run deeper than this. In an open European market, the competition is not just with other UK farmers but with farmers across Europe. We end up with trucks carry milk and milk products criss-crossing Europe to take advantage of price differentials. Common sense tells us that this cannot be the best way to produce milk.

It is instinctively correct that milk is a local business. We should want a stable farming structure producing a safe healthy product in a way that is sustainable over the long-term. A marginally higher retail price is a small price to pay to protect security of supply and hardwire sustainability into milk policy. The economics is simple so leave the economists out of the decision making. The decision should be based on a commonsense approach to sustainability. Of course inefficient or bad farmers should be eased out of the industry but good farmers using sustainable practices should be able to plan ahead with confidence. Meanwhile we should not expect heavy discounts on the milk we buy. You pay for what you get; sustainable, secure supply has a cost which is well worth paying.