IAN POTTER ASSOCIATES 25th March 2011
Specialist Agricultural Quota & Entitlement Brokers
Telephone 01335 324594 Fax 01335 324584
Website www.ipaquotas.co.uk Email Issue No. 614
Today / Last Week / Change / 4 Weeks Ago / 1 Year agoClean / 0.20ppl / 0.20ppl / - / 0.30ppl / 0.25ppl
AMPE / 32.30ppl / - / 32.40ppl / 25.50ppl
MCVE / 32.88ppl / - / 30.35ppl / 27.47ppl
Producers in E & W / 10,975 / - / 11,005 / 11,437
£ : $ / 1.62 / 1.62 / - / 1.61 / 1.48
£ : € / 1.15 / 1.14 / -0.01 / 1.19 / 1.11
Crude Oil / $105 / $103 / +$2 / $85 / $82
Wheat / £200 / £199 / +£1 / £205 / £97
Soya meal / £297 / £295 / +£2 / £310 / £261
(Commodity and currency prices – source BOCM Pauls)
1.2ppl milk price rise for suppliers to Caledonian Cheese/Lactalis - from 1st April (unconfirmed)
1.60ppl Tesco milk price increase – from April 1st
Tesco dedicated producers with Wiseman, Arla and DC will receive a welcome 1.6ppl increase in their standard litre price which, when added to the October 1st 2010 price, will take the Tesco standard litre price to 29.28ppl plus the 0.5ppl Promar cost tracker will rack up to 29.78ppl. Note as stated last week, effectively the 0.32p interim payment paid by Tesco from February 2011 is part of the 1.6ppl increase and not in addition. Tesco have pushed prices on, now it’s up to the rest to do their bit!
1.1ppl milk price increase for Joseph Heler suppliers – From April 1st - takes their 150 farmers standard litre price to 26.14ppl.
In addition Heler’s have also launched three cheeses into Tesco stores in the form of lighter style Double Gloucester and 400g family packs of both Red Leicester and Double Gloucester.
1.1ppl milk price increase for Saputo Cheese suppliers – from 1st April.
1ppl milk price increase for Milk Link suppliers – from 1st April. This takes their standard litre price for its liquid and manufacturing contracts to 27ppl.
1ppl bonus to Freshways producers negotiated in conjunction with FFA
Following recent meetings with the Nijjar family (Freshways) an agreement was reached with FFA whereby Freshways suppliers will receive a 1ppl bonus for the next six months from 1st April, on top of their basket price to be reviewed after three months. For a 3 million litre Freshways producer on the current basket price he will receive 30.22ppl in April and 30.33ppl in May.
Bali Nijjar commented “Our reasons for agreeing to the above are to simply to send out a statement to other processors that the current price being paid to farmers is unsustainable.”
The middle ground processor has recently been under pressure from two groups of its supplying farmers before David Handley and FFA stepped forward to arbitrate. With the volume bonus this will result in some Freshways producers achieving 30p plus. It’s a good result for all involved and the very least each Freshways supplying farmer should do is to buy a subscription to FFA, which represents good value for money at the best of times, but more so now for them. All that remains is for Freshways to recover at least the 1ppl from its customers and whilst it may prove to be a challenge its good news for all in terms of pushing prices up.
Warning – We are hearing that one processor is actively seeking to undermine the efforts of the likes of Freshways. If we receive evidence that a processor contacts a customer to push prices up and a competitor sees this as an opportunity to seize volume by under-cutting we will not hesitate to publish and expose them.
Auction price crash back
This week’s monthly Northern Ireland milk auction conducted by United Milk saw prices fall by 3.22ppl (-10.8%) to average 26.66ppl (last month’s average 29.88ppl). So in the week some processors and retailers came to the price rise party comes this dampener. CEO of United David Dobbin anticipated a drop in prices now the spring flush has started.
However, the average was still the highest March average recorded since de-regulation in 1995, and 1p ahead of the March 2010 average. He commented “The tsunami in Japan, on-going unrest in North Africa and the Middle East and signs of an economic slow-down in China have led to a general down turn in commodity markets.”
Co-op pays 28ppl base price on February deliveries
Successful co-op United Dairy Farmers in Northern Ireland paid a 28p litre base price for February milk deliveries, an increase of 2ppl on the January price. Its producer base price has increased by 4.2ppl in the past 6 months.
The latest price follows on from a successful January auction which averaged 29.16ppl, which was then the highest auction average recorded for more than 3 years.
With the February auction averaging 29.88ppl producers can look forward to a March base price of around 29ppl. Now that’s what you call a market which functions correctly!
Arla producer investment to start January 2012
As one co-op drops its farmer levy in its entirety (Milk Link), another announces the start of theirs: the controversial AFMP additional 4ppl compulsory levy will be deducted from producer’s milk cheques commencing in January 2012. The total producer contribution is expected to be in excess of £70 million and will represent just under half of the estimated £150 million Arla require need to build its 1billion litre factory near London.
The additional 4ppl will be deducted at a rate of 0.5ppl per annum over 8 years and will take the total levy paid by each AFMP member to 5ppl. A 1 million litre producer will then have seen £50,000 deducted from his or her milk cheque by January 2020.
The main opposition to the original plan was over the fact no processing, interest or dividend payment would flow to producers in return for their money which at that time was called an investment.
A series of district and regional meetings with AFMP members will take place during the next 5 weeks. There is no doubt Arla are in the UK for the long haul and looking down the road the big question is whether AFMP’s farmers 5ppl levy will one day be converted in some way in to full membership of Arla. The Danes & Swedes have recently demonstrated their willingness to accept other country’s farmers as full members of Arla following the recent merger with German co-op, Hansa-Milch. On this basis the door must be a-jar for British farmers to explore full membership, in which case the levy could prove to be a good investment. Surely that has to be on AFMP radar?.
Cravendale liquid milk bonus
Starting in July 2011 for every litre sold of Arla’s Cravendale milk 1ppl will be paid to its non aligned producers, which on today’s sales should equate to around a 0.25ppl bonus on producers milk price based on current volumes.
Why can’t the same Down Under stance happen in the UK?
Many thanks to Dairy Farmers of Scotland for alerting Ian to an article concerning Australian beer, where the drinks giant Fosters have frozen beer deliveries to Coles and Woolworths due to plans the two retailers had to sell the beer below cost.
The two retail giants are locked in a head to head price war which involves liquid milk. However Fosters were not prepared to see their beer sold below cost as a loss leader. The brewery made the move to protect the brand’s image and can withdraw supplies under Section 98 of the Trade Practices Act which covers loss-leading behaviour and the luring of customers into shops with low priced items in order to sell other items at higher prices. So why can’t it happen with liquid milk or sales in GB? Because none of our three big liquid processors are powerful enough to stand up to big retailers and discounters that’s why! If one or even two of them did the other would seize the opportunity to drop their trousers on price and give your milk away to grab more business. The solution is is that 3 processors becomes 2. The sooner the better.
Ex-Morrisons CEO joins First Milk’s Board
First Milk has bolstered the muscle on its board with the appointment of former Chief Executive of Morrisons Supermarkets, Bob Stott, starting from 1st April. Stott replaces Beverly Hodson who steps down after a 6-year term of office.
NFU Dairy Board under attack
Back in January, following a meeting (Ian at the time called it an NFU ambush) between FFA, Peter Kendall, Mansel Raymond and Hayley Campbell-Gibbons a joint press release was issued suggesting that the two organizations were to “join forces”.
As part of this “new commitment” to work together Mansel Raymond stated “As part of this, the NFU has agreed to replicate the successful farmer representative summit held last year, and I am pleased that FFA will be involved with this event.”
The representative summit was recently announced as taking place on 20th April, but unfortunately the commitment to involve FFA and David Handley was forgotten by the NFU’s dairy team.
Add to this omission several rather negative comments from (the soon to be departing) Mrs Campbell-Gibbons in relation to FFA’s idea for a drier in the North of England in last week’s Grocer magazine, and a quick divorce was executed by FFA on Monday of this week. FFA accused the NFU of joining forces with FFA as a short term PR stunt ahead of its annual conference.
There is no doubt the NFU Dairy Board has massive communications problem (among many others) which numerous press, commentators, industry leaders and processors are privately discussing.
FFA’s move and the NFU’s communication problem has been this week’s talking point and one journalist summed-up what he perceived to be the NFU’s problem in a quote from Mansel Raymond “David Handley’s plans were not discussed with us beforehand”. As he said, if it’s not the NFU’s idea, or not discussed with them beforehand, they will rubbish the idea, just as they rubbish most things Dairy UK suggest.
There is no doubt the NFU dairy team is in crisis, and it’s time for someone to get stuck into this problem and sort it out. Fast. The NFU Dairy Board all need to take responsibility for the position it finds itself in. Some of the board are so silent no one knows who they are or what they look like, let alone what they do. Come out of hibernation or stand down in favour of more capable people (if they are willing to take on the roles).
Yesterday’s NFU Dairy Board meeting discussed their draft 10-year vision document which has to be re-written. Once again questions were asked as to how little some board members contributed to the day’s meeting and what vision or expertise, if any, they bring. It’s time for more than just navel gazing and time for action.
Now consumers know how some milk producers feel?
Dairy Crest have recalled a batch of Frijj milk shakes due to the fact they may contain a low level of monocytogenes bacteria, which causes listeriosis. The symptoms include fever, muscle aches and vomiting – exactly the same symptoms as DC suppliers normally get to their milk pricing letters these days. If you’ve drunk Frijj recently consult your doctor. If you’ve had a price rise letter consult DCD.
After 25 years His Nibs nabs Big Cheese award (written by Guest Editor)
There has been a double celebration at IPA Towers this week, with the company celebrating 25 years in business at the same time as His Nibs was awarded the RABDF’s Right Royal Big Cheese of the Year Award.
At a ceremony at Buckingham Palace Her Royal Highness The Princess Royal presented Nibs with The 2010 Princess Royal Award for generally being an all-round good bloke over the years.
“We have made this honour to Ian for his outstanding services to the dairy industry in particular his unique role within the sector as a disseminator of up to date information through his website, his regular press articles and his skill at getting to the heart of the matter for the benefit of all,” said RABDF chairman David Cotton (and apparently WITHOUT winking at Ian nor patting a large brown envelope in his jacket pocket.)
Ian, in turn, thanked his legions of farmer fans across the industry. “Both of them have been brilliant over the years,” he said.
“The dairy industry is a fantastic industry to be involved in. One day it's orderly and logical, and the next day something happens and it becomes as mad as a box of frogs. But it has served me well, and I hope that I, in turn, have put something back into the industry to try and move it forward in some small way. I am delighted and humbled by this honour, and I sincerely thank the RABDF for it.”
He also disappointed dozens of processors and industry leaders by promising to carry on with his probing journalistic activities. “There are still plenty of stones to turn over yet.”
And finally from Ian. . .
To all of the FFA Committee, First Milk, Arla, Dairy Farmers of Scotland, Paul Temple, J N Dairies, Robert Wisemans, Burges Salmon & Nocton Dairies for your kind words and comments in relation to my award. You are all off my hit list until the end of the month!