Dairy farmers in the U.K. have recently been protesting about the price being paid for each litre of milk they are producing. There are mixed feelings from the public about this, going by recent debates that have been going on in the media and press. The thing is, most be people will not have been told all the factors which are involved in this scenario. The businesses involved are giving their own version of what is going on which is then re-iterated to us by the Financial Times, The British Broadcasting Company, The Daily Telegraph and all the rest of them. If the journalists don't have experience in areas outside of journalism, the chances are it will be easy for certain types of 'business' people to use them not to keep the public informed, but to create a smoke screen over goings on which they may wish to keep from both the public and potential investors.
Before going any futher, the press and media is far more important in these kinds of situations then most of the people working within it could possibly realise. It is therefore vitally important that the reporters collect all information available from both sides of an argument. If this doesn't happen it will affect the decisions made by political parties and also the general publics' votes when it comes to voting time. And we will end up with the wrong people in government or possibly potentially the right people, but people who have been misled by the people who have been feeding them information such as the press and media.
So, if you are a reporter for the press or media, lets get this one right, otherwise we are at risk of losing all our farmers!
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A lot of the attention by the press and media is focusing on the big supermarkets, but this attention would seem to be mis-placed. The big supermarkets have been blamed by many news papers for squeezing the price that the farmers are receiving. If these news papers had done a bit more research, they could have come up with some important influential factors which have been over looked....
First of all let's look at the Supermarkets, and their reaction to what has been going on....
The Co-operative is one of the smaller buyers of the milk being produced by the farmers, but was one of the first to promise to increase the price they would pay. Also there was no hesitation by Morrisons and Asda to increase the price paid after the protests kicked off. So then, it would seem there was another outside factor influencing the situation. So let's look a little deeper.
Robert Wiseman Dairies processes 30% of the U.K.'s fresh milk, but they are not a retailer to the public as they are a processor which buys milk from farmers and then sells on to retailers. Robert Wiseman Dairies in fact supply milk to the Co-op supermarkets! The Co-op does not pay the farmers directly, but pays Robert Wiseman Dairies who then pay the farmers.
Therefore, there is no guarantee that the increased payments promised by the Co-op will actually reach the farmers. Regardless of this is ; Why did the processor not anticipate this problem arising? The willingness of it's customers to actually pay more............
The problem with lots of businesses which become ....merely vehicles for the investment of billions of dollars, Euros and pounds is that the people who actually run them are little more than landlords,... of that business and often don't have the nouse to really have the understanding of the business they are seen to be running..........
There is one factor which the 'free markets' promoted by many politicians, bankers and capitalist investors do not take into account. That is the 'human factor'. This is the idea that 'the people' want what is right , and this is not necessary what the capitalist motives of the bankers and other beneficiaries of capital want!.......
On 16th January 2012, Robert Wiseman Dairies was taken over by the dairy conglomerate Muller for the price of £279.5 Million.....
....The way this works is that the buyer borrows the majority of the purchase price against the subject company, and puts that company in debt. (Its an internationally accepted financing rule that needs to change). Basically, since Muller bought the company, Wiseman has become in debt to banks. When Muller bought the company, it borrowed money which Wiseman will have to pay back with the added interest payments. The interest will obviously affect its running costs which will have an an inevitable affect on the price it can buy milk and the price at which it can sell. Either the selling price for its end product will have to rise or the running costs will have to be some how reduced.
So, to summarise - the costs of running Robert Wiseman Dairies has increased substantially in the months that have recently passed. It would certainly be possible that the dairy will either have to increase its prices or lower it's costs so the resultant accumulated cash can be used to pay back debt and associated costs such as interest on the debt.
Also note that the mostly borrowed finance was handed over by banks who clearly had no anticipation of problems concerning the products of the dairy which could have an adverse affect on the company's well being. The reason I say this is that on 29th June 2012, Robert Wiseman Dairies released the following statement (just six months after the buyout):-
"Wiseman Confirms Milk Price From August 2012."
"Robert Wiseman Dairies has given it's dairy farmer suppliers a months notice of a 1.7pence per litre reduction in the 'farm gate' milk price to take effect from August 1, 2012."
"The decision follows a collapse in value of the cream in each litre of farm-gate milk over the last 12 months. From it's peak the commodity fell in value by the milk price equivalent of more than 5ppl (Source:Dairy Co Datum)"
"Wiseman had hoped that the need for further adjustment to it's milk price following a 2ppl reduction which took affect in June could be negated by a sustained and significant rally of commodity market values"
"But whilst markets have improved from the lows of recent weeks, they remain at levels not seen since early 2010, when the average DEFRA milk price was 24.19ppl. Wiseman's standard litre price from August will be 24.73ppl."
"Pete Nicholson, milk procure directorment director at Robert Wiseman Dairies said,"We know that this news will come as a major disapointment to Wiseman Milk Group members. We have done everything we can to minimize the reduction in our farm-gate milk price, but we must now reflect the substantially lower returns from the markets which we serve."
One week after Robert Wiseman Dairies reduced their 'milk gate' price, both of the U.K.s other big milk processors reduced their 'milk gate' price. They are Arla and Dairy Crest...... Arla supply Asda......Without being some kind of mind reader , it is difficult to give a clear picture of what is going on. But, it is possible that Arla, and Dairy Crest saw the Robert Wiseman 'band wagon' going passed and decided to jump on it!... After all, it would only result in bigger profits for both these companies.
------------------------------------------------------------------------------------------------------------------------
Okay then, I am no expert on the milk production business or farming, but going by the information made available to us by the press and media, and also this statement by one of the U.K.'s biggest milk processors.
Although Robert Wiseman Dairies does not control the market, it certainly has a major influence. Yet the above statement would have you beleive that Wiseman are at the mercy of the stock markets. I beleive this to be a load bull. Demand for cream may well have dropped in the U.K., but this has been happening over the last couple decades as people have turned to a more healthy diet. This should not be an issue that has had the negative affect that Wiseman claims.
The real reason for Wiseman to be squeezing the price of the milk it buys I beleive is because....
...The debt it is now carrying as a result of the recent buyout has influenced a drive to cut its costs. One of those costs is obviously the farmers providing the milk which it processes.
As mentioned in the above statement, Wiseman has already pushed down the price in June and is going to again in August. So then, what are the big supermarkets' position whilst this is happening. Well that is fairly clear. If a big milk processor which apparently processes 30% of our milk reduces the price it pays, then the supermarkets are understandably going to expect a comparable reduction in the price they pay.
To bring this to a swift conclusion.......
Wiseman are a major player in milk production in the U.K., but due to the recent buyout which will have involved masses of debt being added to it by major banks, it needs to cut its costs to pay back its debts and to keep its investors happy. However, some of the supermarkets who are buying milk direct from the farmers appear to have turned and gone in the opposite direction. The effect this could have on Wiseman is to say the least worrying.
The Dairy farmers that Wiseman uses are under contract to supply milk to Wiseman, it would seem at the price that suits Wiseman as long as a period of notice is given.
If Wiseman sticks to this next price reduction in August there is a chance dairy farmers will go out of business.
However, if the farmers stick to their guns and refuse to supply the milk to Wiseman this would cause major problems for Wiseman.
What is most probable is that a compromise will be reached which will most certainly reduce profits for Wiseman. The problem is, will the company's inability to control the market cause problems with paying back its debt and therefore put the company and the jobs of all the employees at risk ?
If this was to happen the main stream press and media may well tell every one that market forces were to blame. This would be the wrong explanation. The difficulties are being caused by the banks loading the business with debt. Debt that is totally un-necessary. This debt is now risking the livelihoods of British farmers. Whilst much of the press and media only help the banks cover up the real reasons behind the farmers protests.
If you can't get your head round this Idea that bankers and some business people will get some kind of satisfaction from putting businesses we depend on in financial difficulty, you need to find out about some of the benefits of doing this...
See posts on private equity, hedge funds and buyouts in this the X-ECONOMICS blog and also the ANTI-CRISIS ECONOMICS blog. You soon will !
.
Before going any futher, the press and media is far more important in these kinds of situations then most of the people working within it could possibly realise. It is therefore vitally important that the reporters collect all information available from both sides of an argument. If this doesn't happen it will affect the decisions made by political parties and also the general publics' votes when it comes to voting time. And we will end up with the wrong people in government or possibly potentially the right people, but people who have been misled by the people who have been feeding them information such as the press and media.
So, if you are a reporter for the press or media, lets get this one right, otherwise we are at risk of losing all our farmers!
--------------------------------------------------------------------------------
A lot of the attention by the press and media is focusing on the big supermarkets, but this attention would seem to be mis-placed. The big supermarkets have been blamed by many news papers for squeezing the price that the farmers are receiving. If these news papers had done a bit more research, they could have come up with some important influential factors which have been over looked....
First of all let's look at the Supermarkets, and their reaction to what has been going on....
The Co-operative is one of the smaller buyers of the milk being produced by the farmers, but was one of the first to promise to increase the price they would pay. Also there was no hesitation by Morrisons and Asda to increase the price paid after the protests kicked off. So then, it would seem there was another outside factor influencing the situation. So let's look a little deeper.
Robert Wiseman Dairies processes 30% of the U.K.'s fresh milk, but they are not a retailer to the public as they are a processor which buys milk from farmers and then sells on to retailers. Robert Wiseman Dairies in fact supply milk to the Co-op supermarkets! The Co-op does not pay the farmers directly, but pays Robert Wiseman Dairies who then pay the farmers.
Therefore, there is no guarantee that the increased payments promised by the Co-op will actually reach the farmers. Regardless of this is ; Why did the processor not anticipate this problem arising? The willingness of it's customers to actually pay more............
The problem with lots of businesses which become ....merely vehicles for the investment of billions of dollars, Euros and pounds is that the people who actually run them are little more than landlords,... of that business and often don't have the nouse to really have the understanding of the business they are seen to be running..........
There is one factor which the 'free markets' promoted by many politicians, bankers and capitalist investors do not take into account. That is the 'human factor'. This is the idea that 'the people' want what is right , and this is not necessary what the capitalist motives of the bankers and other beneficiaries of capital want!.......
On 16th January 2012, Robert Wiseman Dairies was taken over by the dairy conglomerate Muller for the price of £279.5 Million.....
....The way this works is that the buyer borrows the majority of the purchase price against the subject company, and puts that company in debt. (Its an internationally accepted financing rule that needs to change). Basically, since Muller bought the company, Wiseman has become in debt to banks. When Muller bought the company, it borrowed money which Wiseman will have to pay back with the added interest payments. The interest will obviously affect its running costs which will have an an inevitable affect on the price it can buy milk and the price at which it can sell. Either the selling price for its end product will have to rise or the running costs will have to be some how reduced.
So, to summarise - the costs of running Robert Wiseman Dairies has increased substantially in the months that have recently passed. It would certainly be possible that the dairy will either have to increase its prices or lower it's costs so the resultant accumulated cash can be used to pay back debt and associated costs such as interest on the debt.
Also note that the mostly borrowed finance was handed over by banks who clearly had no anticipation of problems concerning the products of the dairy which could have an adverse affect on the company's well being. The reason I say this is that on 29th June 2012, Robert Wiseman Dairies released the following statement (just six months after the buyout):-
"Wiseman Confirms Milk Price From August 2012."
"Robert Wiseman Dairies has given it's dairy farmer suppliers a months notice of a 1.7pence per litre reduction in the 'farm gate' milk price to take effect from August 1, 2012."
"The decision follows a collapse in value of the cream in each litre of farm-gate milk over the last 12 months. From it's peak the commodity fell in value by the milk price equivalent of more than 5ppl (Source:Dairy Co Datum)"
"Wiseman had hoped that the need for further adjustment to it's milk price following a 2ppl reduction which took affect in June could be negated by a sustained and significant rally of commodity market values"
"But whilst markets have improved from the lows of recent weeks, they remain at levels not seen since early 2010, when the average DEFRA milk price was 24.19ppl. Wiseman's standard litre price from August will be 24.73ppl."
"Pete Nicholson, milk procure directorment director at Robert Wiseman Dairies said,"We know that this news will come as a major disapointment to Wiseman Milk Group members. We have done everything we can to minimize the reduction in our farm-gate milk price, but we must now reflect the substantially lower returns from the markets which we serve."
One week after Robert Wiseman Dairies reduced their 'milk gate' price, both of the U.K.s other big milk processors reduced their 'milk gate' price. They are Arla and Dairy Crest...... Arla supply Asda......Without being some kind of mind reader , it is difficult to give a clear picture of what is going on. But, it is possible that Arla, and Dairy Crest saw the Robert Wiseman 'band wagon' going passed and decided to jump on it!... After all, it would only result in bigger profits for both these companies.
------------------------------------------------------------------------------------------------------------------------
Okay then, I am no expert on the milk production business or farming, but going by the information made available to us by the press and media, and also this statement by one of the U.K.'s biggest milk processors.
Although Robert Wiseman Dairies does not control the market, it certainly has a major influence. Yet the above statement would have you beleive that Wiseman are at the mercy of the stock markets. I beleive this to be a load bull. Demand for cream may well have dropped in the U.K., but this has been happening over the last couple decades as people have turned to a more healthy diet. This should not be an issue that has had the negative affect that Wiseman claims.
The real reason for Wiseman to be squeezing the price of the milk it buys I beleive is because....
...The debt it is now carrying as a result of the recent buyout has influenced a drive to cut its costs. One of those costs is obviously the farmers providing the milk which it processes.
As mentioned in the above statement, Wiseman has already pushed down the price in June and is going to again in August. So then, what are the big supermarkets' position whilst this is happening. Well that is fairly clear. If a big milk processor which apparently processes 30% of our milk reduces the price it pays, then the supermarkets are understandably going to expect a comparable reduction in the price they pay.
To bring this to a swift conclusion.......
Wiseman are a major player in milk production in the U.K., but due to the recent buyout which will have involved masses of debt being added to it by major banks, it needs to cut its costs to pay back its debts and to keep its investors happy. However, some of the supermarkets who are buying milk direct from the farmers appear to have turned and gone in the opposite direction. The effect this could have on Wiseman is to say the least worrying.
The Dairy farmers that Wiseman uses are under contract to supply milk to Wiseman, it would seem at the price that suits Wiseman as long as a period of notice is given.
If Wiseman sticks to this next price reduction in August there is a chance dairy farmers will go out of business.
However, if the farmers stick to their guns and refuse to supply the milk to Wiseman this would cause major problems for Wiseman.
What is most probable is that a compromise will be reached which will most certainly reduce profits for Wiseman. The problem is, will the company's inability to control the market cause problems with paying back its debt and therefore put the company and the jobs of all the employees at risk ?
If this was to happen the main stream press and media may well tell every one that market forces were to blame. This would be the wrong explanation. The difficulties are being caused by the banks loading the business with debt. Debt that is totally un-necessary. This debt is now risking the livelihoods of British farmers. Whilst much of the press and media only help the banks cover up the real reasons behind the farmers protests.
If you can't get your head round this Idea that bankers and some business people will get some kind of satisfaction from putting businesses we depend on in financial difficulty, you need to find out about some of the benefits of doing this...
See posts on private equity, hedge funds and buyouts in this the X-ECONOMICS blog and also the ANTI-CRISIS ECONOMICS blog. You soon will !
.
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