International outlook for Scottish Dairy Industry

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By a Newsnet reporter

The ongoing doldrums of the dairy industry in Scotland could be banished if a new iniative aimed at international markets is successful.

Scottish dairy farmers have battled for years in a market place where the price they receive for their milk is not much more than, and in some cases less than, their production costs.

Liquid milk can retails in shops and supermarkets for upwards of 60p per litre, whilst farmers are forced to accept prices of around 29p per litre or less.  Operating with such tight margins has forced many Scottish dairy farmers to strive for increased efficiencies, often by focusing on economies of scale.

For some dairy farmers the struggle has been too difficult, over the past 20 or so years the number of dairy farms in Scotland has almost halved. In 2012 it is estimated that there are only around 1,600 farms milking cows in Scotland; all that remains of what at one point was the pinnacle sector in Scottish agriculture.

The liquid milk market in Scotland is controlled by what, some farmers have labelled as a cartel of large buyers and processors. When one processor revises their farmgate price the others are almost certain to follow.  Milk processor, Dairy Crest, led recent price cuts in the milk sector.  At the start of May it imposed a 2p per litre cut on almost 600 of its dairy farmer suppliers.

That was followed one week later by an announcement of similar cuts by Robert Wiseman Dairies, blaming weak prices for cream in the supermarkets.  Other milk buyers have since followed suit and farmers have been given as little as four days notice of the reduced prices that they are to receive for their milk.

Against this difficult background, a plan, announced yesterday, to find new international markets for Scottish milk and dairy products is being welcomed by the industry.

New Zealand and Denmark have each, with brands such as Anchor and Lurpak carved out lucrative international markets for the produce of their dairy farms.  Now Scotland is set to follow suit and challenge on the global stage.

Representatives from the Scottish Government, Scottish Development International (SDI), Scotland Food & Drink, NFU Scotland and Dairy UK yesterday launched a joint strategy which aims to promote, brand and market Scottish dairy products at home and abroad.  The strategy is reported to have the burgeoning consumer markets of India and China firmly in firmly in sight.

Speaking after the strategy launch, Scotland Food & Drink Chief Executive, James Withers said: “We need to forge a new direction for the Scottish dairy industry.  The global appetite for dairy products, twinned with Scotland’s growing reputation for food and drink, presents opportunities we haven’t seen before. 

“We need to be ambitious and challenge the current ways of working if we are to drive added value right through the chain.  That means building a new, international platform for the Scottish industry and capitalising on growing customer loyalty at home.”

Cabinet Secretary for Rural Affairs Richard Lochhead gave Scottish Government backing to the strategy: “The dairy sector is an important part of both rural Scotland and the wider food and drink sector.

“It is ideally placed to make the most of its natural assets, stock management and processing skills by developing new markets for its quality produce.  This strategy will provide a clear focus on how we can work together with the industry to maximise its undoubted potential.”

Research work is already underway through Scottish Development International (SDI) to understand global markets and research opportunities for Scottish milk.  The research will be completed in early August when the strategy group will meet again. 

A renaissance of Scottish dairy farming could yet be around the corner.