The decline of the British dairy industry may have been stemmed by a highly unusual combination of circumstances around the world, according to a new report published today (28 August 2007).
The commodity price paid internationally for Skimmed Milk Powder has soared in recent months, forcing up the price paid to dairy farmers for their milk, thereby offsetting some of the 20% increase in costs they have absorbed in the last two years and slowing the exodus from the industry.
At the same time, the extremely wet summer has reduced milk yields and pushed up dairy farmers' costs. Some supermarkets have also recognised the need to pay higher prices for milk and dairy products.
The report, commissioned by Britain's largest farmer-owned dairy business, First Milk and carried out by respected agri-business consultancy, Promar International, is a comprehensive study of current international dairy market trends and indicates that higher prices are here to stay for the next three to four years at least.
Richard Greenhalgh, Chairman of First Milk says: The extraordinary turnaround in the dairy market has happened in just a few short months and caught many in the industry by surprise. But it could not have come at a better time for the British dairy industry, which has seen declining milk volumes and a thousand farmers a year deciding to leave.
It is evident that international demand for Skimmed Milk Powder will impact on the UK for some years. As a result, the price paid to dairy farmers will have to rise if a sustainable supply of liquid milk and cheese for the home market is to be ensured.
John Giles of Promar International, who authored the report, says: There are a number of factors at play here and while none on their own explains the sharp rise in prices paid for Skimmed Milk Powder we have seen of late, it is the combined effect of all of them that makes for this highly unusual situation.
Pulling together data from across the world, the report's key conclusions are:
While British dairy farming has been saved by this combination of international factors, the report draws some conclusions about the future. It says that to survive in the future, dairy farmers will need to:
Richard Greenhalgh says: The report also highlights the need for the British dairy industry to build strong, balanced supply chain relationships in order to compete internationally and supply the dairy products demanded by the public, from domestic resources.
There has never been a better time than now to achieve the consolidation required, when some confidence is returning to the dairy industry and farmers are beginning to see a sustainable future through profitable returns which allow them to invest in their businesses. Such a move must be farmer-led, as it has been by our successful rivals in the EU, the US and New Zealand, who have been supported in this by their governments. We must grasp the opportunity while it is here.
While rising commodity prices have flowed back to the price paid to dairy farmers for their milk, the recent flooding shows how quickly those increases can be absorbed.
Roger Evans is a dairy farmer in Shropshire. He says: The recent heavy rain and flooding has a double impact on dairy farmers. Cows that would normally be grazing on rich summer pasture have been unable to do so in the wet weather and milk yield is around 10% down as a result. The rain has meant the sugars in the grass are down, so cows that should be eating more to compensate have been sheltering under the trees and hedgerows or have had to be brought indoors. Apart from the lower yield, we have had to buy in silage.
But the second impact is likely to be even worse and will hit even those whose pastures were not flooded. In the winter not only will we will have to buy in silage, but we will have to pay a lot more for feed, which has gone up by £30-40 a tonne, or £60 a cow. So the recent price increases we have received have already been swallowed up, he says.
For further information, please contact Jill Coyle on 07825 625205