Milkman of human kindness

Another View

In the wake of Northern Foods' announcement of restructuring in its milk business, accusations are again flying about a deregulated monopoly in the dairy sector.

Since the abolition of the Milk Marketing Board last November - so the argument goes - its "replacement", Milk Marque, has abused its near-monopoly position to force up the price of milk, throwing dairy workers out of their jobs and heralding the end of doorstep deliveries.

The truth is different. In England and Wales, 10 major dairy companies process about 80 per cent of all milk. In many parts of the country, there is only one major buyer. There are 35,000 UK dairy farmers, with an average turnover of less than £100,000 a year. Such small businesses need help if they are to compete in the market against dominant buyers.

Milk Marque is a non-profit-making, farmer-owned co-operative. It seeks to negotiate on a fair basis with large, sophisticated buyers. It is not a monopoly: it sells about 50 per cent of UK milk on behalf of its farmer members. In the free market, any buyer can buy from any farmer, and there are at least 40 buying groups.

In the old days, dairy companies could only buy milk from the MMB, which had a statutory monopoly. Now many have sourced considerable volumes away from Milk Marque. Some, on the other hand, have chosen to buy all their milk from Milk Marque.

Deregulation last November brought, for the first time, genuine competition for milk supplies. Milk was offered for sale by Milk Marque at average prices that were no higher in real terms than under the MMB. Because there was more demand than supply, prices went up by about 8 per cent on average, just as they would in any market-place.

The price paid to British farmers is close to the European average and below countries such as Holland and Denmark. Furthermore, those price rises were entirely driven by demand from our customers.

But the pattern of demand is changing. There is nothing new in the decline of the market for doorstep milk. Suppliers face tough competition from price wars in the supermarkets and discounters, and this has intensified recently. Analysis of rationalisation by Northern Foods this week shows that rationalisation was across sectors other than milk and, within milk, has occurred mainly in its doorstep milk business.

The challenge to all parts of the dairy industry is to respond to changing demand - that is what Milk Marque is here to do.

Milk Marque provides a vital service. It collects milk from thousands of farms, is leading the way in improving milk quality standards - which in the UK are already among the best in Europe - and strives to pay dairy farmers a fair return. It enables the nation to rely on its milk supply and ensures that consumers can have faith in the value, freshness and quality of dairy products. That is a fair bargain.

Andrew Dare is chief executive of Milk Marque.