Some people are getting very confused here I think. Try this from The Guardian:
How much is a fair price for a pint of milk? The answer is: whatever price allows everyone in the supply chain – farmer, dairy, supermarket – to turn an honest profit.
Seriously, The G is arguing that a fair price includes a fair profit margin? Doesn\’t that completely destroy everything they say about banks, oil companies and multi-nationals?
For example, a \”fair profit margin\” would obviously mean a profit over and above the cost of capital. Something the British banks haven\’t achieved in years: meaning that this argument leads to one insisting that bank profits should be higher than they are.
As to what is actually driving the milk price. We\’re in a rigged market because of the EU. That\’s one cause.
But far more importantly, we\’ve the standard interaction of supply and demand. Dairy farming is becoming more efficient: as farming has been doing since the Neolithic. That rising food production is what has enabled civilisation to develop. More milk is being produced from less land with fewer cows. It really is not a surprise that prices paid to producers are falling in real terms.
The effect of this is to bankrupt some producers and force them out of production. Which is, harsh though it may sound, exactly what needs to happen. Production is becoming more efficient thus we need fewer producers.
*Shrug*. That\’s just the way it is folks.