Retailers under pressure over price war With the deadline for the proposed price cut for milk fast approaching on 1 August, attention moved yesterday to the role of the major retailers, with UK farm minister Jim Paice arranging to meet them next week to discuss how they can help keep the industry sustainable. Then, fired by a report showing retail prices had dropped to their lowest level in more than seven years, NFU Scotland announced it had written to all the big supermarket chains calling for them to immediately address their "crippling approach" to sourcing milk. The report that triggered the union's ire was published yesterday by DairyCo, with author Patty Clayton pointing to price promotions on liquid milk, along with consumers tightening their belts, preventing any rise in retail prices. In fact, in the period under scrutiny in the report, there had been an 11.6 per cent increase in farm gate prices and it was the middle men, the processors, who were being squeezed. Clayton said: "In the past, increases in processor costs have been matched with rising retail prices but a significant factor in the liquid milk market in 2011-12 has been the lack of such an increase. This reinforces the importance of the current industry activity on improving milk contracts and the negotiating power of farmers. In his letter to retailers, NFU Scotland president Nigel Miller said: "Initiated by the discounters, and rapidly adopted by other UK retailers, milk price wars have propelled the retail price of milk to its lowest level in seven years and does little to reflect the true cost of producing that product." Miller then hit out at supermarkets whose contracts for own-label fresh milk have offered relief to the small number of producers fortunate enough to be in such an arrangement but he added: "The time has come for supermarkets to stop hiding behind these contracts and deliver fair pricing across the entire dairy category. Retailers have enjoyed healthy margins across the entire dairy category for years and the time has come for them to demonstrate the value they place on having fresh dairy products available to their customers in stores by delivering a fair share of the margin down the chain. Speaking in Parliament, Paice gave an indication of the tone and content of his forthcoming meeting with the majors. The big problem that we face is what I view as the absurd level of price cutting by some retailers, particularly those in what is known as the middle ground. One retailer is openly selling milk at 99p for four pints," he said. The reality is that such a price is completely unsustainable. Such retailers need to understand that if they go on like that, there will be no milk. There is a limit to cost cutting. There is no country in the world that can sell bottled milk at the equivalent of 25p a pint by the time it has been through the whole processing chain. That is absurd, and such retailers are biting off their nose to spite their face.