Milk monopoly crumbles

NORTHERN FOODS is poised to announce plans to buy its pounds 500m of milk supplies direct from dairy farmers in what looks likely to be the first attempt to smash the 60-year milk monopoly in England and Wales, writes Patrick Hosking.

Northern, one of the biggest dairy companies in Britain, will tomorrow reveal details of its challenge to the Milk Marketing Board and its successor body from next year, Milk Marque.

Northern is determined to bypass the MMB, which it sees as an unnecessary middleman adding to the cost of its supplies. Northern buys 17 per cent of all raw milk in England and Wales.

Other large dairies will be watching Northern carefully. Unigate has made no secret of its worries about the MMB and has called for the creation of a regulator - an Ofmilk - to prevent it exploiting its monopoly power to raise prices unfairly.

As well as threatening the viability of Milk Marque, the move presents a dilemma to Dairy Crest, the MMB's large commercial arm, which is to be floated on the stock market as an independent body. As such, Dairy Crest would have a duty to its shareholders to seek the cheapest supplies.

The Agriculture Bill, which converts the MMB from a statutory monopoly to Milk Marque, a voluntary co-operative, is going through Parliament. It is expected to receive Royal Assent this summer and the reorganisation is pencilled in for April next year.

For the first time since the 1930s, the 29,000 dairy farmers in England and Wales will then have a choice of buyer for their milk.

Northern would have to recruit an estimated 5,000 farmers to meet its needs. It is expected to sign them up for one-year contracts terminable on three months' notice.

Although it cannot buy milk directly until the MMB is dismantled, it is expected to start wooing farmers within the next few months.

A spokeswoman for the MMB said: 'Whatever they announce, nothing can happen until the Milk Marketing Scheme comes to an end, probably in April 1994.'

(Photograph omitted)