Production And Milk Marketing Flashcards
Name 7 direct factors affecting the future dairy industry
⭐️Milk prices ⭐️Government environmental strategy ⭐️Seasonality of supply/flat profiling ⭐️Processor and retailer margins ⭐️Input/production costs ⭐️Consumer demand ⭐️Perishable products requiring efficient systems
Trend in milk production
No. of producers are decreasing, but average herd sizes and milk yields are increasing
Factors affecting average price trends
⭐Prices volatile
⭐️Milk Marketing Board abolished 1994
⭐️Disease outbreaks (BSE and foot and mouth)
⭐️2012- collapse in price of cream, supermarket pressurise for cheaper prices
AMPE
Actual milk price equivalent
MCVE
Milk for cheese value equivalent
IMPE
Intervention milk price equivalent - the value of a litre of milk that has been manufactured into butter and SMP and sold in intervention. An assumed cost of manufacture is deducted to give equivalent raw milk price.
Factors affecting milk price received by farmers (5)
⭐️Quality ⭐️Volume ⭐️Composition ⭐️Penalties ⭐️Collection charge
Market outlets (3)
⭐️DIRECT to milk processing company
⭐️Through a COOPERATIVE
⭐️Through a MARKETING GROUP to a dairy
Main aim of MMB
Sustain milk output and price stability
Key changes in milk procurement in recent years (3)
⭐️More being obtained through direct supply contract:
Downward trend in GB milk production to secure supplies
Reduced demand for milk the third parties
⭐️Larger proportion aligned to dedicated retailer contracts:
Secure supplies
Limited to three large liquid processors (Arla, Dairy Crest and RWD/Muller)
⭐️Larger average farm size
Benefits of an integrated supply chain (4)
⭐️Share performance data
⭐️Farmers receive higher prices
⭐️Deliver different welfare recommendations
⭐️Insulated from price trends
Typical feature contracts (3)
⭐️No reference to end use
⭐️Advantages: processors can move milk around easily; no unnecessary costs
⭐️Disadvantages: no guidance/leadership from supply chain; don’t deliver to best value
Non typical feature contracts (3)
⭐️Direct link to end use
⭐️Advantages: farmer had knowledge and can plan production; avoids unnecessary pursuits of low value constituents; cost benefit; supply to meet market, not quota
⭐️Disadvantages: less flexibility; long term planning required; potentially less efficient
Problems with contracts and selling 1⃣
REDUCE POOLING METHOD OF PRICING
⭐️Allow chain to meet market requirements more clearly
⭐️Harmonised price for all raw milk
Problems with contracts and selling 2⃣
BASE PRICES
⭐️Contracts based on liquid milk
⭐️Dairy Crest and Waitrose - focusing on assurance and traceability
⭐️Dairy Crest and M&S - unique formula with own set of market indicators
⭐️Differentiate: quality, service, assurance, cost etc
⭐️If only price competed on, all milk will be priced off at lowest common denominator
Problems with contracts and selling 3⃣
LEVEL SUPPLY
⭐️Show fixed monthly volume requirements
⭐️More dialog between producers and processors
Problems with contracts and selling 4⃣
FARMERS NOT PAYING ATTENTION TO MARKETING MIX
⭐️Big difference in price paid to farmers on same contract than between farmers in different contracts
Problems with contracts and selling 5⃣
PROCESSOR/RETAILER POWER ⭐️Change prices at short notice ⭐️Some hard to quit ⭐️Farmers can't negotiate - lack of partnership, collaboration and trust ⭐️Pushed into other schemes
Dairy voluntary agreements (6)
⭐️30 day notice of price changes
⭐️Retrospective price adjustments not acceptable
⭐️Can supply to more than one processor
⭐️Right to automatic contractural release
⭐️Must be a commitment to engage with farmers and to maintain prices within manually agreed parameters
⭐️Where farmer disagrees with prices, right for producer to exit contract with notice of three months
Why is there a lack of confidence?
Continual low margins leads to reduced production, meaning investment decisions are likely to be abandoned and there will be a shortfall of milk to meet contract
Farmer focus
⭐️Get back to basics ⭐️Know contract details and deliver precisely ⭐️Think beyond farm gate ⭐️Develop dialogue with buyer ⭐️Look at production costs ⭐️Collaborate ⭐️improve efficiency ⭐️New product opportunities
Name 6 indirect factors affecting the future dairy industry
⭐️GLOBAL influences on UK market prices ⭐️Exchange rates ⭐️Skimmed milk powder trade ⭐️Feed prices ⭐️Impact of trade liberalisation/imports/exports ⭐️Weather
