Context

Position - The Milk Supply Association (MSA) is a group of 141 dairy farmers based throughout south west Scotland that supply milk to a creamery in Stranraer owned by Lactalis.  Since 2012 milk markets have been volatile and while returns in 2013/14 improved milk prices have subsequently fallen again to values that do not cover the cost of production.  The market volatility and price reductions are a result of a range of factors that include; milk quota abolition, a global surge of milk production not matched by global consumption, a Russian import ban diminishing export sales and extreme competition between UK retailers.  Prices are likely to remain subdued well into 2016.

Problem - The milk price paid by Lactalis at the time of this application was 21.01ppl.  At this value, many of the farmers supplying the plant are not able to cover their costs of production.  In addition, there is a lack of understanding of supply management at farm level.  Some farmers have expanded without informing the creamery and this has caused an imbalance of supply and demand putting further pressure on prices.  As a result of this situation, there is a need to improve the competitiveness of the dairy farming businesses supplying the factory by making them more cost efficient and improving their ability to plan and forecast milk output.  Traditional methods of encouraging farmers to make improvements do not appear to be working fast enough and all too often technical support is delivered to the farm without consideration of a single processor, rather it is targeted towards a range of farmers using a number of systems (grass based or housed) supplying a variety of markets.  This dilutes the effectiveness of the support.