Wholesale milk price rise comes in today

Sunday 25 March 2018

The wholesale price of milk goes up today, with some retailers still not confirming if the price will be passed on to customers.

It was announced earlier this month that Guernsey Dairy is increasing the wholesale price of its milk by £0.0475, or 4.75p a litre, as a result of negotiations between it and the Guernsey Farmers' Association.

The move came after the States' Trading Supervisory Board said it had "carefully considered" the annual reduction in the payment dairy farmers receive from the States for meeting environmental and welfare standards and increasing farm costs. An independent price reviewer supported the settlement terms.

The wholesale price of milk is what shops and other stockists, along with the hospitality industry, buy the milk at. In the past when it has been increased, shops have passed the added cost onto customers, increasing the retail price by the same or a similar margin. 

STSB said that the retail price of milk was no longer fixed by the States, however, so it would be up to retailers to decide whether to absorb the increase or pass it on. Express has asked a number of retailers what they intend to do on this occasion and are waiting to hear. 

Pictured: File image of Guernsey cows

The Dairy last increased the wholesale price by 7.5%, or approximately 9p, at the start of April 2017. Before that, a litre of milk was around £1.18, but now, it is around £1.27. This increase will put it up to around £1.31 a litre.

Of the 4.75p price increase that is being implemented now, farmers will receive 4.066p per litre - 2.560p for the next slice of the Dairy Farm Management Payment reduction and 1.506p to cover increased costs.

That payment has reduced by £200,000 a year since 2014, having started at £2.085m., with the aim of it being reduced to £1.085m. over the five year period between then and 2019.

When the wholesale price rise was announced, Guernsey Dairy General Manager Andrew Tabel said he was pleased that they had been able to reach a settlement with the Guernsey Farmers’ Association.

"Whilst this is likely to see an increase in the retail price of milk the agreement has other aspects to it that will further improve the analysis on which price changes are determined in the future with an emphasis on efficiency across the industry," he said.

"The GFA is pleased that it has reached a settlement for the revised producer price for 2018," a Guernsey Farmers Association representative said.

"The Farmers put forward a fair case for this increase which covers costs (RPI) 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."

Pictured: Deputy Charles Parkinson 

Speaking during last week's States meeting, Deputy Charles Parkinson also said the wholesale price rise had been approved following negotiations. The President of the States Trading Supervisory Board, which oversees Guernsey Dairy, said the price increase had been set to include a sum to cover the cost of milk production and to cover any reduction in subsidies to the dairy farmers as agreed in the Dairy Farm Management Scheme, which was approved by the States in 2014.

Deputy Parkinson said he was aware the wholesale price rise may lead to increases in the retail price of milk across the islands - but he reiterated it is now up to retail outlets to decide whether or not to increase prices, as per a previous States decision. He added that milk retail prices currently vary by up to 10p per litre.

Deputy John Gollop asked if there is any proof that there is sustainability in demand for Guernsey milk, and queried whether a price rise will affect general sales. Deputy Parkinson said there is nothing to suggest that rising milk prices or varying milk prices across the island has any impact on the supply or demand for Guernsey milk.

Quoting total milk sales in recent years, Deputy Parkinson said in 2010, 6,580,000 litres of milk were sold. In 2012, 6,525,000 litres of milk were sold - dropping to 6,435,000 litres in 2013. He said that is fairly static, despite a slight fall off in sales but he is satisfied that demand remains fairly constant.