Earlier this week the NFU organised a dairy risk management event, the first of its kind in England and Wales, to consider new ways of managing the market risk that is now inherent in the dairy sector. The vital need for government to regulate on the collection of volume and price data was emphasised by speakers throughout the day and overwhelming agreed by delegates at the event. The event brought together representatives from the whole dairy supply chain including farmers, processors, manufacturers and retailers, as well as wider industry including banks, consultants, other industry organisations and government.
The morning session focused on the concept behind futures, with speakers from the European Energy Exchange (EEX), and risk management specialists INTL FCStone and Rice Dairy. This was followed by a practical session in the afternoon, which delved into how various parts of the supply chain manage risk with Nuffield Scholar, Richard Counsell explaining the farmers’ perspective, and clearly articulating that the lack of volatility management tools are preventing many farmers from investing in and expanding their farms.
In a survey of views at the event:
- 91% of delegates voted that there is a need for greater market transparency in the UK.
- 90% of delegates stated that they would be interested in the potential to lock in longer-term prices.
- 58% of delegates voted that transparency in market data was the one thing that would help move forward the dairy futures work, with 14% selecting trust within the supply chain, 7% more working examples from outside the UK and 20% promoting the benefits of futures.
- 62% of delegates voted that it was jointly the whole supply chain and government’s role to take the dairy futures work forwards, with 18% voting just processors and 15% just farmers.
NFU Economist Rohit Kaushish, who chaired the first session said: “This event saw experts from across the world share their experiences of managing dairy risk, through the use of futures markets and other risk management tools. The message from the event was crystal clear, the UK government must regulate on mandatory price reporting for the dairy industry to move forwards with market transparency and risk management tools such as dairy futures. The NFU has already been lobbying at UK and EU level in this area, and we will strengthen our work following the findings of the conference.”