I really do not know what the future holds, but in my opinion the supermarkets have far too much control over the supply chain.
Milk like all commodities becomes cheaper the more you purchase. This always gives the biggest suppliers the greatest competitive advantage, but that’s capitalism!
We are at the bottom end of this scale so do not benefit from bulk discounts. We buy direct from the farm and pay a “fair” price. Historically we pegged our 2litre price against the supermarket 4pt price. People got a bit less milk for the same money, but had it delivered to their door and were given interest free credit. When the supermarkets decreased their prices they simply put up the price of other items to cover the loss in margin. We really only sold milk so could not follow the pack without risking the future of the business and the 15 jobs it supports. We overnight became uncompetitive just at the moment the nation was tightening its belt. We have held our own, but only just. Many of our competitors are suffering dramatic and probably terminal declines in their business. The only national company left is closing rounds and depots at unprecedented and unsustainable rate.
The farm gate price of milk is currently just under 30p per litre. There are variations on this depending on who the farm sells to, the length of the contract and when it was negotiated. For the sake of easy maths, 30p per litre. The processing, packaging and transport costs are about 10p per litre. This makes the cost of 2 litres of milk 80p and 91p for 4 pints.
Many smaller shops and cheap multiples including Iceland and Farmfoods are selling 2litres of milk for £1. Out of the 20p margin the processor, wholesaler and retailer have to make a profit. Supermarkets have their own contract with the processors so no wholesaler. All the big supermarkets are selling 4 pints for £1.18, but this is quite often further discounted. This leaves a gross margin for the processor and the retailer of 27 pence.
A few years ago the supermarket price of milk was £1.54. When they reduced all the discount retailers and small shops also reduced the wholesalers and processors were squeezed and therefore the farmers got squeezed too. There has been a continual downward pressure on the retail milk price for the last few years. During this period the consumers price perception has dropped. People see milk as a cheap discounted product which further compounds the problem.
The figures I have used are approximate and the reasoning over simplified, but the point I believe is valid. The supermarkets must increase their prices back to where they once were. This will allow all of the supply chain to follow, making it worthwhile for the farmers, processors, wholesalers and retailers alike.
Food concerns 
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