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Thread: Tesco Switch 200m litres of milk supply from Arla to Muller.

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    Tesco Switch 200m litres of milk supply from Arla to Muller.

    https://www.fginsight.com/news/tesco...ly-switch-9530

    The FG article says this is an 'alleged' move, but i've been told that Arla farmers have received a text tonight confirming that they have lost this milk volume to muller. will this be as disastrous for the dairy industry as Mr Handley is making out?

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    Re: Tesco Switch 200m litres of milk supply from Arla to Muller.

    Can't be good news for Arla certainly. Only this month they were signing more producers onto direct contracts. Complete disregard to the owner members, which I am one. What the hell are they going to do with all that milk now? Hope they have a good contingency plan.

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    Re: Tesco Switch 200m litres of milk supply from Arla to Muller.

    Quote Originally Posted by Disco View Post
    Can't be good news for Arla certainly. Only this month they were signing more producers onto direct contracts. Complete disregard to the owner members, which I am one. What the hell are they going to do with all that milk now? Hope they have a good contingency plan.
    Are arla direct suppliers going to be receiving 16ppl from March 1st??

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    Re: Tesco Switch 200m litres of milk supply from Arla to Muller.

    Quote Originally Posted by Bankville View Post
    Are arla direct suppliers going to be receiving 16ppl from March 1st??
    Apparently they'll be looking at a cut of over 3p, so yes, something like that i would think.

    chap just down the road from me, big holstien man with a broken calculator and a stack of unpaid bills big enough to run his farm 2000 boiler on, is with arla, he keeps telling me that Arla were looking for more milk and were wanting him to expand, he's just brought 30 french heifers to fill this imaginary demand.

    Wonder if they'll be telling him that now?

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    Re: Tesco Switch 200m litres of milk supply from Arla to Muller.

    French will flood in again most prob. As burning a few cars got them 213 million aid - nice !!!

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    Re: Tesco Switch 200m litres of milk supply from Arla to Muller.

    don't give Mr Handley any ideas, mind you, you'd be locked up before you'd struck the first swan vesta if you tried that sort of tactic over here,

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    Re: Tesco Switch 200m litres of milk supply from Arla to Muller.

    Quote Originally Posted by matbrojoe View Post
    Apparently they'll be looking at a cut of over 3p, so yes, something like that i would think.

    , big holstien man with a broken calculator and a stack of unpaid bills big enough to run his farm 2000 boiler on,

    You don`t have to look far to find blokes like that these days !

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    Re: Tesco Switch 200m litres of milk supply from Arla to Muller.

    The direct contracts have to take a big cut on March 1st. Their milk will only be worth what the bottom of the market is worth as that is where it will now be. If we pay them any more than that then we, as owner members, who have invested our own cash into the business are subsidising them. As much as I have sympathy for them, my business cannot afford to subsidise others right now. Others who I might add, had the same choice to become members like I did.

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    Re: Tesco Switch 200m litres of milk supply from Arla to Muller.

    When are dairy producers going to wake up and smell the flowers?
    The milk market is over supplied and what is happening is a race to the bottom withthe last producer left standing the one who will win.
    It is a fact that under supplying the market equates to a 10% rise in the price of milk, over supply by as little as 0.01% causes the price to drop off a cliff. The facts are there, cow numbers increasing, volume onto the market increasing, price falling. It will only be a matter of time before those on 'good' contracts get the 'Dear John' letter revising the terms of their contracts.
    So I fear that unless you have unlimited funds and can ride this out till a huge swathe of milk producers go bust there will be no let up.
    Just a thought but please discuss.

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    Re: Tesco Switch 200m litres of milk supply from Arla to Muller.

    There's a world wide over supply of milk but we're only around 80% self sufficient in dairy products. I understand that the UK is one of only two developed dairying nations that are not producing a surplus of dairy (i was told this but haven't yet fact checked it)

    That said we don't have enough processing capacity in this country to fulfil the demand for processed dairy products. however, the world market cannot put liquid milk on the Uk's supermarket shelves and milk floats, so why do we let over supply of dairy commodities drag down the price of the sizeable uk liquid market down to the bottom?

    I think there's a lot the conventional milk market could learn from the way the organic market has been managed in the past 10 years, the majority of producers, something like 60% are with the farmer owned coop OMSCO, and OMSCO have kept the price premium at a sustainable level even in times of over supply because as a farmer owned company they have an interest in a high farm gate price, Companies like Muller have an interest in driving the farm gate price as low as it will go.

    Farmers need to think in the long term now and support the companies that will protect their interests, ie the ones owned by farmers, it's just unfortunate that one such company, first milk, has been so incompetently run that you'd want your bumps feeling not to leave it if you had the opportunity.

    I know plenty of first milk guys on less than 10p, and yet their hard earned money went to build factories like Westbury, yif you think it's bad now, where would we be without that place?

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    Re: Tesco Switch 200m litres of milk supply from Arla to Muller.

    Quote Originally Posted by matbrojoe View Post
    There's a world wide over supply of milk but we're only around 80% self sufficient in dairy products. I understand that the UK is one of only two developed dairying nations that are not producing a surplus of dairy (i was told this but haven't yet fact checked it)

    That said we don't have enough processing capacity in this country to fulfil the demand for processed dairy products. however, the world market cannot put liquid milk on the Uk's supermarket shelves and milk floats, so why do we let over supply of dairy commodities drag down the price of the sizeable uk liquid market down to the bottom?

    I think there's a lot the conventional milk market could learn from the way the organic market has been managed in the past 10 years, the majority of producers, something like 60% are with the farmer owned coop OMSCO, and OMSCO have kept the price premium at a sustainable level even in times of over supply because as a farmer owned company they have an interest in a high farm gate price, Companies like Muller have an interest in driving the farm gate price as low as it will go.

    Farmers need to think in the long term now and support the companies that will protect their interests, ie the ones owned by farmers, it's just unfortunate that one such company, first milk, has been so incompetently run that you'd want your bumps feeling not to leave it if you had the opportunity.

    I know plenty of first milk guys on less than 10p, and yet their hard earned money went to build factories like Westbury, yif you think it's bad now, where would we be without that place?

    Sorry to burst your bubble Joe but the Uk currently produces far more liquid milk than we can consume.
    The 'we'll solve everything by building processing plants' is a myth as these products compete on the commodity market which are freely traded worldwide and like liquid there is a very finite 'propensity to consume'
    Sorry the only way to solve the problem is to reduce production to less than demand and/or ban imports.
    Look at car manufacture, if cars don't sell manufacturers don't ramp up production they do the opposite.
    The organic market is a joke and totally unrelated to free trade. Figures suggest that over 55% of organic producers will cease production in the next 12-18 months.
    Organic production is very much a niche <1% and totally dependent on subsidy payments, 90% of producers cease when the top rate subsidy ends.
    For the majority of 'organic' producers it is a conviction/life style system with over 95% being economically insignificant.
    Anyway cowmen ditched the old milk boards years ago and now look foundly back to those times I remember wiser sages warning farmers not to throw the baby out with the bath water
    Its the brutality of the free market, supply and demand. Production increases, price falls, production increases to compensate for the fall, price falls further, this continues until a significant number of producers go bust (examine the steel industry) production falls below demand price goes up profits made. Then the cycle starts all over again . Eventually all that is left is a monopoly.

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    Re: Tesco Switch 200m litres of milk supply from Arla to Muller.

    I don't really understand the ins and outs of the dairy processing game but you would assume that Muller have made Tesco an offer to supply that volume and Arla were unwilling or unable to do it at the same price?

    I do wonder how long it will be before all the milk buyers are enforcing their own quotas effectively, I am told at least one buyer here has basically said they don't want any extra milk, so don't bother sending it.

    There is that long running discussion which centres around everyone dropping their concentrate feed rate in an effort to turn the tap down, but of course with producers experiencing falling incomes their automatic choice is to try to make more litres to maintain their level of income.

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    Re: Tesco Switch 200m litres of milk supply from Arla to Muller.

    Quote Originally Posted by LALANS View Post
    Sorry to burst your bubble Joe but the Uk currently produces far more liquid milk than we can consume.
    51% of milk goes to the liquid market, the uk is 81% self sufficient in dairy produce. It doesn't matter if the NZ farmers are giving their milk away, it's a perishable product, you can't put it on your cornflakes. So why let world commodity prices drag down the price for all uk milk?

    The 'we'll solve everything by building processing plants' is a myth as these products compete on the commodity market which are freely traded worldwide and like liquid there is a very finite 'propensity to consume'
    Sorry the only way to solve the problem is to reduce production to less than demand and/or ban imports.
    Look at car manufacture, if cars don't sell manufacturers don't ramp up production they do the opposite.
    The organic market is a joke and totally unrelated to free trade. Figures suggest that over 55% of organic producers will cease production in the next 12-18 months.
    Care to give a source for this figure? I can't imagine many organic milk producers will be falling over themselves to go back to conventional at the moment.

    Organic production is very much a niche <1%
    according to the 2015 organic market report, it's actually 4.8% of the liquid market, the uk retail organic dairy market is valued at 398 million, it's hardly insignificant.

    and totally dependent on subsidy payments, 90% of producers cease when the top rate subsidy ends.
    Yes, if only we weren't dependent on subsidy like conventional farmers, oh, hang on... AFAIK there aren't any organic specific subsidies available at the moment anyway.


    For the majority of 'organic' producers it is a conviction/life style system with over 95% being economically insignificant.
    Anyway cowmen ditched the old milk boards years ago and now look foundly back to those times I remember wiser sages warning farmers not to throw the baby out with the bath water
    Its the brutality of the free market, supply and demand. Production increases, price falls, production increases to compensate for the fall, price falls further, this continues until a significant number of producers go bust (examine the steel industry) production falls below demand price goes up profits made. Then the cycle starts all over again . Eventually all that is left is a monopoly.
    I don't necessarily disagree with your points about the free market, however, going back to my original point, I am being paid a sustainable price for my milk because my milk buyer, OMSCO, acts in my best interests, not to maximise profits for outside share holders. A few years ago when organic milk was in over supply they refused to sell organic milk below a certain level, rather than slashing prices to gain market share, and passing that loss on to their suppliers. If you set aside any prejudices about organics for a moment, the organic market demonstrates how a strong co op can protect the interests of the producers.

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    Re: Tesco Switch 200m litres of milk supply from Arla to Muller.

    Joe
    I gleaned my information from the following
    DEFRA funded survey (Cambridge Univ I think) on organic producers 2014
    Agricultural Statistics 2014
    Milk Development Council
    Consumer Trends 2014
    Office For National Statistics 2014

    The danger to Organic prices is that they will be dragged down as conventional milk prices continue to fall. It is also a limited market volume as I have already said so could quite easily suffer from over supply by a very modest increase in production.
    Increasing the processing capacity in UK while admirable is very risky especially on a falling market and again the industry would be faced with the pressure of the commodity market.
    I am afraid that there seems to be no easy answers.

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    Re: Tesco Switch 200m litres of milk supply from Arla to Muller.

    Quote Originally Posted by LALANS View Post
    Joe
    I gleaned my information from the following
    DEFRA funded survey (Cambridge Univ I think) on organic producers 2014
    Agricultural Statistics 2014
    Milk Development Council
    Consumer Trends 2014
    Office For National Statistics 2014
    Links?

    The danger to Organic prices is that they will be dragged down as conventional milk prices continue to fall. It is also a limited market volume as I have already said so could quite easily suffer from over supply by a very modest increase in production.
    These are both situation that have occurred in the past, this is the point, OMSCO have successfully managed such situations to the best interests of their members, and were able to do so because they are a strong coop with a good market share, and as a farmer owned entity it is in their interests to keep the farm gate price as high as possible rather than slash prices in order to win market share from their competitors, or let surplus milk flood the broker market and drag down the price for everyone.

    Increasing the processing capacity in UK while admirable is very risky especially on a falling market and again the industry would be faced with the pressure of the commodity market.
    Which is precisely why companies won't do it, and farmer owned coops will, who built westbury? and bad as things are, where do you think we'd be without it now?

    I am afraid that there seems to be no easy answers.
    I think we can agree on that

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    Re: Tesco Switch 200m litres of milk supply from Arla to Muller.

    Joe

    If you look back to the days of the MMB's how many of these old factories were shut down and never replaced ? You are correct we are not producing any more than at any time since quota came in, but there is far less processing capacity, some closed down to make sure there was under capacity !!
    Clever business for some !!

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    Re: Tesco Switch 200m litres of milk supply from Arla to Muller.

    Quote Originally Posted by Argyll View Post
    Joe

    If you look back to the days of the MMB's how many of these old factories were shut down and never replaced ? You are correct we are not producing any more than at any time since quota came in, but there is far less processing capacity, some closed down to make sure there was under capacity !!
    Clever business for some !!
    Shut down because they weren't making any money probably! The same thing happened to bakeries, factories and breweries. Costs were too high!

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    Re: Tesco Switch 200m litres of milk supply from Arla to Muller.

    Quote Originally Posted by Disco View Post
    Can't be good news for Arla certainly. Only this month they were signing more producers onto direct contracts. Complete disregard to the owner members, which I am one. What the hell are they going to do with all that milk now? Hope they have a good contingency plan.
    Oh dear, have I just read about the contingency plan on the front of FG? That they are giving 12mo notice to direct suppliers!?

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