Financial pain of milk price cuts could hit £100m

The falling price of a pint is now described as a crisis for the industry. Picture: Dave Thompson/PA Wire
The falling price of a pint is now described as a crisis for the industry. Picture: Dave Thompson/PA Wire
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DAIRY farmers have been forecast to collectively receive £100 million less this year than they did a year earlier because of the relentless downfall in farm gate milk prices, as the Government said it would continue to hold talks with the industry over the current crisis.

With average milk prices down at 23.66 pence per litre (ppl) as of June - the latest figures available from the Department for Environment, Food and Rural Affairs - average prices are showing a 25 per cent drop in a year.

Economist, Lucia Zitti, who works for the National Farmers’ Union, said the situation could now be called a “crisis”, following protests by dairy farmers in Britain and France.

In a blog post this week, Ms Zitti wrote: “Some people are asking us if things are as bad as we make out. Is the UK dairy sector really going through a crisis?

“The simple answer is “yes”. Even the reluctant EU Commissioner Phil Hogan finally admitted that the UK dairy industry is in “very serious difficulty”.”

Explaining the financial cost to farmers of the plummeting prices, she added: “In the first six months of 2015 UK dairy farmers’ revenues decreased by about £57 million compared to the previous year - down from £244m to £187m. With more price cuts announced for August and September, it is not unrealistic to think that farmers will collectively receive £100m less this year than they did last year.”

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While shoppers have been able to pick up four pints of milk for as little as 84 pence at some supermarkets, the prices paid to farmers for liquid milk has fallen across the board.

The NFU said some First Milk farmers now receive less than 16ppl.

Last month, Arla, which sources milk from around 250 Yorkshire dairy farmers, announced that its standard litre price for members was being cut by a further 0.8 pence from August 3, while Dairy Crest has lowered the price for farmers on its standard liquid contract by 1.4ppl to 21.69ppl from September.

Processors and retailers have pointed to disappointing results of the Global Dairy Trade auction amid an over-supply of milk on the world market, but farming leaders at the NFU are calling for the Government, retailers and processors to take more collective responsibility for the future of the British dairy industry.

The NFU in England, Wales and Scotland, and the Ulster Farmers’ Union have urged the four Defra farming ministers to hold a joint meeting with them to find solutions to the current crisis, as well as to challenges in the lamb and arable sectors.

Imports of New Zealand lamb are up by 2.8 per cent, while rapeseed, feed wheat and barley growers are receiving less than the cost of production, the NFU said.

It said 236 farmers have left the dairy sector since January 2015, and the trend look set to continue, with only around 10 per cent of dairy farmers on contracts that track farmers’ cost of production.

A Defra spokesperson told Country Week that it was keen to work with the agricultural industry to discuss what could be done.

“We maintain a regular dialogue with farming unions and industry. We look forward to discussing these issues with them further.”

Farmers’ trolley protests over milk price cuts

Action threat if milk protests turn ugly