Retailers take advantage of farmgate and commodity prices to increase margins. The retail margin on liquid milk has increased from 1.3ppl in 1995 to 15.6ppl in 2005. If they can bash the prices down with their suppliers they increase their margin, if the farmgate price goes up, they pass the increase on to customers. We live in a world where profit margins and share price is the backbone of all that exists.
As an example, in per centage terms the breakdown of the pence per litre of milk in 1995 was:
Farmgate 58%
Wholesaler 39%
Retailer 3%
In 2005, this became:
Farmgate 36%
Wholesaler 33%
Retailer 31%
In July 07 the farmgate price was 19.7 ppl, so this increased price has been passed on to consumers. 16% of farmers questioned by the Milk Development Council are thinking of giving up because conditions are so tough and they face tough negotiations with big retailers. If you really want to make a stand, try and buy at the farm gate if you can and bypass the supermarket.