One dairy farmer going under every day as Cathedral City is latest to axe contracts
One British dairy farm is going out of business every day, experts have warned, as the producer of Cathedral City Cheese axed the contracts of more than a dozen farmers.
Saputo Dairy, which also makes Clover and Utterly Butterly spreads, terminated agreements with 13 farmers in the South West who supplied it with 20 million litres of milk every year.
The farmers, who had exclusive supply arrangements with the global dairy giant, are now at risk of going bust if they do not find alternative business in 12 months.
Saputo said it was a 'necessary thing to do for the business' but has given no more details as to why it has cut ties.
The move has sparked anger among industry experts who say dairy farmers are already fighting unfair pricing policies from food giants alongside looming inheritance tax payments.
Diarmaid Mac Colgain, the founder of pricing platform Concept Dairy, said: 'The reason inheritance tax is kicking off is because it's the final straw for farmers.
'Every day a dairy farmer goes out of business. A lot of this is because they are being paid below the cost of production. We have seen them crying because they can't afford to pay their staff.
'Every month, farmers have no idea how much they are going to get paid by the processor. Imagine going to work every month and not knowing what you are going to get for it.
'Companies know they can manipulate the price paid back to the farmer, controlling their own price risk by reducing the farmer's milk price.
'On top of this, they can cancel the farmers' contracts and that's their livelihood destroyed. The farmers always come off worse.'
UK loses 440 dairy farmers a year
There are around 7,100 dairy farmers in Britain, but latest statistics from the Agriculture and Horticulture Development Board show that the UK is losing around 440 dairy farmers a year, a fall of nearly 6 per cent.
Pricing structures mean farmers often sell their milk without knowing how much they will get paid for it, and some months will make a loss.
Richard Thomas, the chairman of Davidstow Creamery Direct (DCD), which negotiates prices on behalf of farms that supply Saputo, said the farmers would struggle to find new contracts and said the termination had effectively put them out of business.
'If you're a dairy farmer, you have one contract with one processor to sell your milk,' he said.
'The 13 farmers have lost their business. Where the market currently is and where production is, there are very few processors looking to take on extra dairy farms. Supply is greater than demand.
'For some of the farmers it will be their one and only customer. Your job is to sell milk and if you lose your contract to sell milk and nobody else is looking for milk, that creates significant challenge. Our focus is trying to support those members in any way we can.'
Mr Thomas added that most dairy farmers felt 'powerless' because of the low prices paid in the industry.
The farms have a 12-month notice period where they will continue to supply Saputo.
After that, it is thought the dairy giant will instead purchase more milk from its 300 other supplier farms across Britain.
NFU in talks with Saputo
The National Farmers' Union (NFU) said it was in talks with Saputo and the DCD over the terminated contracts.
'The NFU continues to offer support to its dairy farmer members in the South West who have been impacted by this move,' said Paul Tompkins, chairman of its dairy board.
'We are also in conversation with both the processor and Davidstow Creamery Direct, the producer organisation which represents the milk pool and negotiates on their behalf.'
Saputo, which also owns the Wensleydale Creamery in North Yorkshire, did not disclose the reason for ending the contracts, but said it cut ties with the farmers to 'ensure our milk pool is fit for the future'.
A spokesman for the company said: 'Saputo Dairy UK has recently made the decision to serve notice on a small number of our Davidstow-supplying farms.
'This is not something we have taken lightly; however, it is a necessary thing to do for the business as we seek to ensure our milk pool is fit for the future.
'We are offering the impacted farms support during their 12-month notice periods. We are incredibly proud of our supplying farms and the high-quality milk they produce for our market-leading cheeses.'
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