Supply and Demand are Key

Does it need to be written in neon lights? In the world market situation in which farmers now operate, supply and demand are key. Market sentiment and prices are hardening on the back of lower production forecasts and the introduction of the limited voluntary milk reduction scheme.

Farmers should now plan for themselves based on what is right for their own farm situation and business. The processors and retailers in the Agri industry put the forward the notion of ‘all us stakeholders are in this together’ but there has been little evidence of any such solidarity in the last eighteen months. Processors and retailers are indeed in it together and doing fine, ‘business as usual’ for the other links of the food chain where retail prices for dairy products remained unchanged but it’s at the expense of producers as farm-gate prices plummet and farm businesses go to the wall. This cannot go on.

The ball is in the farmers’ court to some extent now; while the price is moving in the right direction they have a very pertinent question to ask themselves – where to now? 

The much heralded voluntary reduction scheme, given its nature, is unlikely to have a long-term impact on output as it will mainly attract those who were planning to exit the industry in any event.

The question then for farmers is stark – enticed by increased returns (which are still below break-even point), do they ramp up production to replace the withdrawn capacity, or do they take a longer term view, send a real signal to the markets that production will not be increased until the margin that is there in the market is returned to the farmer, i.e. production will not be increased until there is a real increase in milk prices.

Of course this won’t be the message emanating from the industry ‘experts’, who are more concerned with maintaining a constant and increasing flow of raw material to our processing plants irrespective of the human cost to the primary producer.

Farmers must now think and act for themselves; they should analyse their cost base, tailor their output to the most sustainable carrying capacity of their land, organise themselves into a farmers’ union that will properly represent their interests, then fight for their fair market share. In short, they should stop being dictated to by the processors and retailers, stop being guided by all these ‘experts’ and realise that when it comes to their interests, they themselves are the experts, they themselves are the only ones who best know in terms of price and production what is sustainable and what’s not.

In the ‘supply and demand’ chain, farmers are the suppliers – time to demand their fair share.