IP Dairy Farmer - August 2020

Earlier this year, I described Sainsbury’s reputation with its aligned producers as continuing to slide downhill, particularly for those who have faced the impact of the Tomlinson’s collapse. Well Sainsburys (SDDG) aligned farmers are once again furious at how the retail giant “is walking all over us to the point we feel like contract milkers and may as well hand over control of our farm to Sainsbury’s”. 

The latest spat is down to the bully boy wanting to sell more of its own beef in store, insisting a minimum of 20% of the beef calves from each producer are sired by one of two Angus Bulls, with the semen only available from Genus at circa £11 per straw. The calves will be sold to Blade Farming at from 10 days old to a maximum 41 days for £156 for heifers and £242 for bulls less haulage. It’s a non-negotiable compulsory change starting in 2021 in England and 2022 in Scotland, and it has got the farmers steaming. Several are claiming its Sainsbury’s acting in an anti-competitive manner.

I really struggle to understand how my close neighbour and current Head of Sainsbury’s Agriculture, Barney Kay, has seen fit to force this through! Surely, it could have been achieved by negotiation, especially if it’s such a great proposition. Furthermore, if Sainsbury’s is dictating the bull semen to be used it should pay for it! The move has gone down like a lead balloon, especially with many Sainsbury’s farmers who have long standing trusting relationships with others who take their calves, or who rear and finish their own beef in addition to those who breed only pedigrees. It has even resulted in one Sainsbury’s farmer representative resigning.

But hey! Look on the bright side!  It’s not all bad for those involved because at least Sainsbury’s has a track record of looking after its aligned dairy farmers when things go wrong! Or not, AKA Tomlinsons! Finally, I see Sainsbury’s is now selling Italian and Spanish barn eggs! I wonder how it manages to farm assure and inspect the suppliers in the pandemic, or is it a Sainsbury’s tick box exercise with the priority being cheap eggs. Just as it was when it recently sold Polish beef. Another PR own goal!

In 2011 Sainsbury’s launched with great fanfare its 2020 sustainability plan, including doubling its sales of British food and to significantly reduce its carbon emissions and improve its environmental credentials. It has failed spectacularly, yet no one has reined it in, and the eggs and beef exampled are simply the retailer reverting to type. “Buy cheap, no matter where it is from,” is clearly its mantra.

On a similar theme, two much talked about milk purchasers who plan to merge (Freshways and Medina) are both encountering farmers who have had enough and want out. The approach by each company couldn’t be more extreme, with polar opposite approaches.

Yes, I know both Freshways and Medina have encountered significant challenges with Covid 19, but their farmers were already behind the market and questioning whether their liquid models were delivering for them.

Medina have a group involving tens of millions of litres, who have served three months’ notice on grounds of a breach of contract which will leave Medina very short of Autumn milk. The Hussain family (Medina) is keen to reach an amicable resolution, but to do so will have to be transparent and answer some critical, and well-thought out farmer questions.

At the other end of the scale is the Freshway’s Niijar family (NOT to be confused with other genuine, reputable businesses in the industry with the same name). They stand accused of multiple contract breaches with several farmers having left without giving contractual notice to effectively sell their milk on the spot market. It is estimated that this could be 30 to 40m litres of milk. The NFU legal team is locking swords with Freshways lawyers over the breaches, and monies due.

Now Bali Niijar’s solution was to contact competitor milk purchasers warning them of potential repercussions if he finds out they are buying his “lost” milk. Meanwhile, most of his supplying farmers remain on a low milk price, knowing he is having to purchase extra spot milk that is currently costing around 32 to 33p delivered to his factory in London.  No wonder one of the questions from the group of Medina farmers is “following the antics of and bad publicity of Freshways, why ON EARTH are you still considering a merger?”. Several of those Medina farmers fear a merger with Freshways will result in a continuation of low milk prices, and that Freshway’s dubious communication skills and current gutter-ish reputation will rub off on their company.

Needless to say farmers supplying Freshways and others are calling for major contract reform, but I don’t believe some milk purchasers will respect any contract because they believe they make the rules and can walk all over farmers and deal with competitor processors as they see fit. There are a handful of milk processors who feel no obligation or compulsion to support dairy farmers. You either like it, or lump it.

For sure, the power of resignation can still be a top trump card, especially if it’s done as a group, with a professional approach AND provided there is somewhere to go (which there isn’t now!)

No milk for a processor = no business, and a purchaser short of milk this autumn is in for some serious pain if a spot market knocking on 40ppl is the alternative. That will put more pressure on their farmer’s milk price as they seek to balance the books. But a number of Freshways farmers seeking a new buyer have confessed whilst they have been upto 14 weeks between deliveries and payment they have now completely lost track of how much money they are due.

As one seasoned dairy industry wise owl said to me “only when dairy farmers have been badly beaten many times over do they tend to come together to work with each other”. Surely, that time has come for many who are not on aligned contracts, not in a co-op and not with a milk purchaser they trust.

Finally, a comment or two on the launch by George Eustice of the Government’s consultation on contracts. It’s a 23-page document, with 29 tough-going questions (plus name and address etc) which I think few grass roots will be keen to complete before the 15th September deadline.

At processor level a limited number adopted the voluntary code launched by Jim Paice in 2012 and fewer stuck with it. If they had the current pressure for change would not have risen its head.

I also see the EFRA committee is calling for evidence on the Government’s response to Covid 19. One of its questions reads: “How has the pandemic affected the dairy industry and dairy farmers, and why did it need extra support, compared to other agricultural sectors?” That’s a very good question and I look forward to seeing the answers!