Dairy futures remain firmly in the balance, despite a dramatic upturn in average prices paid to farmers for milk in the last year.
Industry body Dairy UK warns that any botched handling of Brexit by politicians risks throwing dairy production into a fresh crisis.
In a white paper published by the trade organisation this week, dairy leaders set out the “game-changing” opportunities and challenges that the industry faces as a result of the UK’s divorce from the European Union and from current consumer confidence in dairy foods.
Within the detailed 98-page document, Dairy UK identifies that continued trading agreements with the EU without tariff and non-tariff barriers will mean massive export and growth opportunities, but failure to protect those agreements will damage exports and reduce demand for dairy.
The worst outcome from Brexit would be a return to World Trade Organisation rules, it states. UK producers would face prohibitively high export tariffs and the cost of EU dairy imports into the UK would spiral.
It makes the case for an unhurried transition period which would give the industry the chance to adapt and take advantage of the opportunities Brexit creates, while highlighting that access to skilled and unskilled labour is vital. Failure to maintain that access will drive up operating costs, with a major impact on margins.
Handled sensitively to the requirements of the industry and milk producers are well placed to capitalise on a growing demand for dairy products globally, it says.
Despite the arrival of plant-based alternative drinks and a rise of anti-dairy activism, Dairy UK maintains that the domestic market also offers positive prospects. Its research suggests that 87 per cent of consumers drink cow’s milk, 94 per cent of adults buy cheese and 78 per cent consume yogurt or fromage frais.
Domestic and international demand and more balanced production volumes has delivered a brighter outlook for British farmers who have seen average farmgate milk prices reach 29.56 pence per litre (ppl) in August, 1.81ppl more than July and 36 per cent higher than in August last year, when the average price was 21.74ppl.
Such is the resurgence that the average milk price is now above the five-year average.
To avoid damaging the upwards trend, Dairy UK chairman Paul Vernon said “no effort can be spared” by Whitehall to secure a positive Brexit outcome and secure a healthy future for the dairy industry.
“The White Paper demonstrates that consumer love for dairy remains very strong, and we have to ensure that we are equipped and ready to continue to help feed the nation for generations to come,” Mr Vernon said.
“If Brexit is successfully delivered there is tremendous potential in terms of exports and product development. If it is a failure, there will be far reaching consequences for dairy.
“Given the increase in global demand for dairy, prospects are good. We do, however, need to seize the moment – and that will require yet more of the innovation and inspiration that have been the hallmark of our industry for generations.”
The contribution to the dairy market by UK processors is significant. Some 14bn litres of milk supplied by 13,000 dairy farmers are currently processed annually. Processors directly employ 23,000 staff and a further 50,000 individuals work on dairy farms in the UK.
Dr Judith Bryans, chief executive of Dairy UK, believes the continued loyalty of consumers to dairy products bodes well for the industry’s prospects.
“The White Paper details the performance of our industry across a wide range of areas. It shows we have a track record we can be proud of but, like any major industry, we have to maintain our deep commitment to continually improve and innovate. Ultimately, we are judged by consumers and we are very grateful for the outstanding and enduring support they give to dairy.”
Responding to the white paper and its message to government to set the right conditions for the industry to thrive post-Brexit, a spokesperson for the Department for the Environment, Food and Rural Affairs told The Yorkshire Post: “The UK dairy sector is a crucial part of our world leading food and farming industry.
“We firmly believe that outside the European Union, our farmers will be free from the bureaucracy of the Common Agricultural Policy to focus on producing more great British food.
“We are determined to get the best deal for our farmers as we leave the EU and we will work with the industry to design a new approach that delivers.”
Dairy trade and economic policy will be central to talks set to be held at the International Dairy Federation’s (IDF) World Dairy Summit in Belfast this week.
The high-profile industry conference will hear from key global trade and dairy speakers including Dr David Walker, New Zealand’s permanent representative to the World Trade Organisation, who will discuss New Zealand’s experience of international trade and Tomas Pietrangeli, representing Arla Foods, will cover the challenges and opportunities for the UK and the EU as a result of Brexit.