Why is milk cheaper than water?

Posted on 28 Mar 2011 in Think Welfare | 1 comment

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At the weekend Pete said to me “do you know that it’s cheaper to buy a litre of milk than it is to buy a litre of water?”

I checked it out and he’s right. When the supermarkets compete fiercely with each other over the price of milk they force the price they pay to dairy farmers down as low as possible. It can reach the point where it puts them out of business. This issue hit the news again at the beginning of 2011.

In February 2011, the National Farmers Union (“the voice of British farming”) published a report with the facts. The Cost of Milk Production report shows the average cost of producing milk was 29.10 pence per litre (ppl) for April 2010 to March 2011. However, the average British milk price paid to farmers in November 2010 was 25.94ppl, meaning they were actually losing 3.16 pence on every litre they made.

The ironic thing is that now a couple of the big supermarkets have announced they’ve signed deals with some farmers to pay them above the market rate… but is that really acting responsibly when they forced down the market rate in the first place?

Supermarkets will say that shoppers demand cheap milk… of course we do, we demand cheap everything(!) But the question is are we happy to pay a few extra pence once we know it’s the difference between dairy farmers making a living and losing their livelihoods?

Is cheap at any price OK?



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