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The price that farmers are paid for their milk by Guernsey Dairy will rise next year, and they will also be given a £150k one off payment from States coffers, to compensate for a "difficult year".
Wholesale prices shops pay to purchase Guernsey Milk will rise by 6.5p a litre as a result of this decision. That is a cost they have always previously passed on to the customer, but could, theoretically, choose not to, as retail prices are no longer fixed.
Pictured: The price of milk in the St Peter Port M&S food hall this morning. It is thought other shops are currently selling milk for as low as £1.20 a litre.
The hiked cost will not only cover the additional payment to the dairy farmers - which will be 4.5p - but will also cover increasing operating costs at Guernsey Dairy itself. The cost changes will kick-in on the 6 January.
The decision to start paying more to farmers alongside the one-off payment of £156,000 is all part of an effort to cover losses they incurred "due to the unusually wet conditions in the spring and extended dry summer". As a result of the weather, farmers had to introduce winter feed stocks earlier than normal, which unfortunately tied in with escalating worldwide feed and fertiliser costs, caused by widespread drought conditions elsewhere.
Pictured: The Co-op was selling milk for £1.32 a litre this morning, while other retailers are believed to have been selling it for as low as £1.20 a litre today.
Guernsey Dairy General Manager, Andrew Tabel, said: "The negotiated settlement limits any increase in the retail price of milk by recognising and apportioning the exceptional costs incurred by farmers in 2018 and remedying them separately. This acknowledges and recompenses farmers in light of the difficult and challenging year caused by the prolonged dry weather and escalating feed and fertiliser costs; resulting in the use of winter feedstuffs during this period.
"The extraordinary payment of £156,000 – equivalent to 2p per litre - will be paid from the Dairy’s cash reserves. Recompensing the farmers in this way mitigates the full impact of the Gate Price increase for our customers.
"The latest settlement [...] recognises the importance of continuing to reduce the cost of milk production while acknowledging the requirement to reinvest to preserve and sustain a viable dairy industry in the island."
Because this additional financial support will be funded from Guernsey Dairy’s reserves, it will not directly affect the wholesale milk price.
While the wholesale price of milk is going up 6.5p, retailers aren't bound to pass that on to customers anymore. This means while they are charged 6.5p more, they could choose to only up their customer prices by 1p. The law which fixed the prices was changed in the hopes of encouraging competition. But this has not happened so far when there have been previous price hikes.
Of the 6.5p per litre wholesale price increase, farmers will receive 4.5p - that increase is supposed to acknowledge increasing farm costs that are not covered by the extraordinary lump sum payment.
The annual agreement follows negotiations between the Guernsey Dairy Management Board and the Guernsey Farmers’ Association.
Dave Cowley, a representative from the Guernsey Farmers' Association, added: "The GFA is pleased that it has reached a settlement for the revised producer price for 2019. The farmers put forward a fair case for this increase which covers costs as well as the next reduction of the Dairy Farm Management Payment. The farmers are always conscious of the impact a price rise has on customers and therefore try to keep their costs to a minimum being as efficient as they possibly can within the constraints of farming on an island.”
The decision to make this uplift also took into consideration the next step in reducing the Dairy Farm Management Payment Scheme, the closure of which was approved by the States in 2014. It stood at £2.025m. at the time of that decision, and has since had £200,000 removed each year. Next year, it will have been reduced by a total of £1m., to £1.025m..
Jersey farmers recently received a similar support package, understood to be worth £350,000.
Pictured top: The wholesale gate price of milk is going up, again.
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