Milk price protests: Global economics, local forces and a bicycle chain

Credit where it's due to Farmers For Action for putting milk prices back on the public agenda, not just in our own farming press but the national media too. Of course, this begs the question whether protests are justified and the answer, of course, is 'it depends...'

The critical thing is what protests are hoping to achieve. If, on their own, this is a lasting increase in the milk price paid to farmers, I fear this is not going to come about because there are too many factors in play. But that does NOT mean protests are not justified, but rather that their purpose is (or ought to be) something achievable as a direct outcome. The problem with associating protests directly with milk price is that there is no mechanical linkage...no leverage. Expecting protests alone to have a direct effect on ex-farm milk prices is like pedalling a bicycle with no chain: Lots of effort and noise, but no connection with the wheels.

In contrast, what protests can realistically be expected to achieve, if planned and staged the right way, is the generation of public goodwill towards dairy farmers for their essential role in maintaining a reliable supply of fresh milk. All cyclists know how much easier it is to pedal with the wind than against it. Public goodwill can be a strong breeze at our backs in a team pursuit for better milk prices. But on its own, it isn't going to push us very far forward.

This brings us back to the bike's missing chain and an important difference between global and local economics. Globally, I trust the NFU's analysis that recent reduced demand (from Russia and China in particular) combined with increased supply is responsible for lower prices for long shelf-life dairy commodities. Take a look at grain and you'll see that a similar thing has happened there too.

Now, imagine for a minute that you own a factory that needs skimmed milk powders or indeed grain as raw materials. Of course, these are both high value materials relative to their bulk, so they can be shipped long distances at presumably affordable cost. What you pay for them is linked closely to their global commodity prices. However, if your factory also makes products that need fresh milk, then local factors come into play that are not necessarily linked with the global picture.

Imagine for example that just three of your local suppliers - each with 300 cows - gets out of milk. You need to find new sources for about 20,000 litres a day. Even if these are only 25 miles further away, but already supplying one of your rivals, how can you persuade them to supply your factory?

Or, perhaps all your 100 suppliers - each with 200 cows on average - de-tune their cow rations by just 10 MJ/cow/day because they have lots of forage and want to reduce bought in feed costs. That's likely to result in at least 36,000 litres* a day less coming over your factory weighbridge. And unless you have guaranteed minimum daily deliveries written into their contracts that you're able to enforce, what are you likely to do about it? This, I believe, could be our bicycle chain.

[*2 litres/cow/day x 18,000 cows in milk]

Otherwise, expecting any buyer to pay any more than the bare minimum for milk is like expecting yourself to pay more than the going rate for red diesel...or fertiliser...or dairy chemicals. And when was the last time you did that? Quite.

So: 1) Global economics are highly relevant to having a viable dairy farm business, but 2) they are not the entire story. 3) Protests do have a justified role as long as they are geared to generating public goodwill in support of dairy farmers. 4) Local economics could possibly be our bicycle chain; the thing to remember is supply and demand. If supply goes down and demand remains unchanged, prices can be expected to go up. 5) But this will only happen if milk buyers notice their daily volumes dropping and staying down, putting factory throughputs under pressure. 6) And this will only happen if enough dairy farmers have the bottle and vision (and leadership? NFU and FFA take note) to take action.

Or 7) Just keep shouting 'the sky is falling'*. It's your choice. [*From the children's fairytale, Chicken Licken]

By the way, I write this as a member of Farmers For Action and welcome viewpoints other than my own. In addition to pointing out flaws in my thinking, what I would really hope for are constructive ideas for making things better in lasting way...which I have to say are sadly lacking in recent farming press coverage.

Hats off to NFU over milk market: They really do get it

From time to time in the past, mainly in conversation with friends or workmates, I've been critical and possibly unfairly so, about the NFU. Today, I feel the need to confess and repent because, at a reception they hosted at the excellent inaugural UK Dairy Day in Telford, they clearly get it about the future of UK milk production.

Unfortunately, they have to disguise the message with corporate twaddle like 'adding value' and 'supply chain transparency' to prevent a shoot-the-messenger inspired exodus of milk producing members. However, no matter how well crafted the language to cushion the blow, the harsh reality was there, between the lines of carefully managed delivery. In as few simple words as possible, it is: 'Produce milk competitively in a global market'.

Someone in the audience asked a question about fairness in milk pricing. I wanted to shout out, but didn't because this was someone else's gig, "where's the place of fairness in business?"

Surely, without sounding unduly like a pinko revolutionary, employers exploit staff; those with capital exploit those without; strong exploit the weak; and cunning, the naive. It's survival of the fittest in this 21st Century world. In the farming arena, how many farmers pay more than they have to for diesel or wages? Why would a milk processor be any different?

Milk is a commodity, the price of which paid to farmers will go up and down due to factors way beyond their control (or NFU's or FFA's). It's not very different from digging stone from a quarry. When lots of large scale construction work is taking place, demand rises and along with it, the price. If or when construction work slows, the stone price drops. Unlike milk of course, quarrying can also stop until the price picks up. In milk, the only viable future is, as I nearly heard at the Dairy Day, to 'produce milk competitively in a global market'. Well said, NFU.

Big Brands or generics? Be careful what you wish for

Superficially, the widespread and still growing availability of generic animal medicines can be seen as an opportunity to give customers a cheap deal. In human medication, anti-inflammatory ibuprofen - the generic of its branded forerunner, Nurofen® - shows what is possible. In one of the many bargain stores around the country, a 16-pack of 200mg ibuprofen tablets can be bought for less than 50p, while the equivalent Big Brand is typically three times the price.

The same choice of generic or brand exists already in VPS medicines, of course. Indeed, a new product cupboard that is thought to be somewhat under-stocked suggests this is unlikely to change any time soon. But is this a good thing for the VPS trade (or indeed, their farmer customers)?

Big Brands do not achieve that status by accident. It takes sustained and significant investment by the manufacturer or product licence holder in marketing and promotions, sales campaigns and CPD for SQPs, brand advertising and sponsorships. Products with potential for justified widespread use by farmers that are well-marketed can be expected to jump off country store shelves and make the merchant a decent margin, and their sales team some nice commission.

In contrast, customers can face a wide choice of generics on the shelves or in merchants' catalogues, some differing from others is quite subtle ways. In this situation, many will require SQP guidance if their treatment selection is to be a responsible one. Not only does product need matching to problem, its use must also be justified in the first place, all of which - if it is to be done properly - consumes SQP time and intellect. Clearly, SQP training and ongoing CPD cater for this, but nonetheless SQPs individually shoulder significant responsibility in the prescribing process.

Meanwhile, on a commercial and practical note, each new generic that is stocked demands shelf and storage space, each at a cost to the distributor's business. Furthermore, as the number of available generics for a specific treatment increase, competitive pressures are likely to drive prices down, and retailer margins along with them.

So the likelihood of a generics-dominated future offers the prospect of even tighter margins and with this, fewer opportunities for diligent and ambitious SQPs to support customers with sound advice and forward looking health (and welfare) planning. With this low value future in mind, perhaps we should be careful what we wish for the next time a customer winces about the price of Branded Wormer compared with generic ivermectin, for example. Otherwise, in an all generics future, who will pay SQP wages and who will write VPS medicine prescriptions? Quite.

Unanimity among agri-journalists over global issue for farming

Among 26 journalists from 14 nations at the IFAJ post-congress tour's first night dinner in Stratford-upon-Avon, there was unanimity in response to a question of fundamental importance to each country's farming industry.

At the end of the main course, guests were asked to stand up by UK GAJ member Phil Christopher in his capacity as a director of dinner sponsor, Sterling Sires. He then invited those who believed their own country's farming industry was good at marketing to sit down.

The response opened up the opportunity for a marketing case study based on the dinner's main course. It featured Aberdeen Angus ribeye steak, served with an expertly matched red wine, as sold by the sponsor's sister company, Paul & Kirsty's Perfect Night In.

"When this business started in 2012, we thought we were selling gourmet steaks and select wines to discerning, connoisseur consumers," said Mr Christopher. "But by analysing sales information and finding that 90% of sales have different purchaser and delivery addresses, we proved ourselves wrong. It turns out we're a gift company, competing with premium hampers, for example."

As a result of seeing themselves from customers' rather than their own perspectives, the Perfect Night In team completely re-designed it's product range as a number of distinct, occasion-specific options. Prime Angus steaks and carefully matched wines remain the centrepiece, but additional gift accessories have been added and the presentation upgraded significantly.

In addition to seeing themselves through customers' eyes, Phil Christopher said the other key marketing issue illustrated by the Angus ribeye steak main course was consistency. "Those served here are from the Blade Farming supply chain," he explained. "From a calf's birth right through to dinner plate, Blade's rearers and finishers of about 20,000 prime cattle annually all use the same production system.

"So at Perfect Night In or an evening like this, we know for sure the steaks will be the same premium quality at any time of year. They are always Angus-cross-Holstein, which have always grazed for at least a six month period, were always fed on a high quality forage based system, and were protected against disease from birth by proven protocols.

"When you buy a Coca-Cola, it's always exactly the same as last time. That's what customers want: Predictable and consistent quality. And that's one of the important things that livestock farming around the world need to focus upon."

Sterling Sires supplies semen of progeny-proven and genomically selected superior bulls from a range of dairy and beef breeds. Sire selection is geared to offering customers sustainable genetics from which to breed the long lived, regular breeding, high performance cattle that are essential for sustainable production. For animal production to be sustainable, we believe it has to be profitable for the farmer, environmentally sensitive and socially acceptable.

By the way, (i) huge thanks are due to the Midlands Guild group’s Nick Bond and Liz Snaith for organising the dinner; and (ii) just in case you’re wondering about the ‘stand up, sit down’ poll, everyone remained standing.

-ends-

Sterling Sires Ltd contact: Paul Westaway 07814537462, paul@sterlingsires.co.uk

Author & PR contact: Phil Christopher, Red Rock Publicity, 07802 672304, phil@redrock.uk.com