Get to grips with dairy value chain

Sir Ben Gill, the chairman of Westbury Dairies who farms at Easingwold, said that, if they failed to understand that market, they would lose out to increased imports of added value products.

The former president of the NFU was addressing Tuesday's conference of the Royal Association of British Dairy Farmers.

Sir Ben said the industry had been so preoccupied with hitting quota, and the finer details of CAP reform, that it had tended to ignore the marketing of its product.

"We cannot put off understanding the entire dairy chain any longer, or becoming more intimately involved in our own affairs beyond the farm gate," he said. "Year by year, we have seen imports of high added value products increase at our expense, while the UK has consistently resorted to exporting bulk commodities. This must change."

Sir Ben illustrated his case by pointing to the retail prices of butter, citing a 64p retail difference among four different lines of 250gm packs in Tesco.

"The very rough gearing is that, for every 5p in the price of butter, there is another potential penny a litre to pass down the chain, some of which should reach the farm gate. Some brands will command a price premium as a result of good promotion and advertising, but is that not money well spent?" he asked.

He said Westbury was focusing on adding value to its skim milk powder by producing to tight customer specifications while maintaining efficient, cost, effective production.

Westbury's blueprint was helping its farmer suppliers to focus on producing milk with better butterfat and protein levels. This, in turn, would help the company cut transport and logistics costs, and enable the Trowbridge plant to generate accurate production forecasts.

"We have worked out that for an average 1m-litre Westbury supplier, increasing protein and butterfat levels by 0.1pc, and milk output by 3pc could mean an extra £10,000 on the bottom line of his business," said Sir Ben.

"CAP reform is about the marketplace delivering a realistic price that delivers a profit to the efficient producer. The sooner others in the dairy trade and the retail sector realise this, the less pain the industry will suffer in the short term, and the lower the costs for the industry in the longer term as abandoned production has to be rejuvenated