Milk price cuts are a growing threat to the dairy industry

Farmers from the North East say recent milk price cuts cut see more and more people leaving the industry

Adam Fradgley / Exposure Photography Rob Harrison, NFU dairy board chairman
Rob Harrison, NFU dairy board chairman

North East dairy farmers are warning that ongoing cuts to farmgate milk prices could represent the biggest threat to the industry in recent history.

A combination of over-production, global economics and supermarket competition have seen the price some farmers are paid for their milk plummet as low as 20p per litre.

Meanwhile, farm costs are some 36% higher than they were eight years ago, with animal feed - the single largest cost component of dairy farms - now 50% more expensive than it was in 2007.

According to the NFU, the situation is contributing to a mass exodus from the sector.

The number of dairy farmers in England and Wales has halved in just over a decade to below 10,000, with 60 farmers giving up milk production in December 2014 alone.

With predictions that fewer than 5,000 will be left in the industry within a decade, it’s little wonder NFU dairy board chairman Rob Harrison recently compared being a dairy farmer at the moment to being a boxer - “on the ropes and taking body blow after body blow” until eventually throwing in the towel.

Dave Thompson/PA Wire Unpasteurised milk could soon be available from vending machines
Milk
 

Dennis Gibb, who has represented the North East on the board for around 10 years agreed the situation was critical.

“I would say this is probably the worst situation we’ve ever been in from a financial point of view,” he said. “For every one pence-per-litre the milk price drops, that costs us £25,000. You can imagine the impact that has.

“Early in the year, we were getting 33p. That’s now down to 24p, which puts us well and truly in a loss making situation.”

Mr Gibb, who runs a dairy and arable farm at Eachwick, near Ponteland, with his brother Richard said the pair had responded to the cuts through attempting to improving the efficiency of the business.

That, however, has not been an easy task - a typical day’s work could stretch from around 3.15am to 7pm.

“No one know how long this will go on for,” Mr Gibb added. “Historically, the price of milk has gone up and down, but there’s now 4% more milk being produced globally but only 2% extra consumption. That’s the main reason that we’ve seen the milk price drop.”

As far as the supermarkets are concerned, many retailers say they are absorbing the impact of the price wars themselves and are continuing to support British farming.

Mr Gibb, however, suggested it “doesn’t help matters” when four pints of milk can be bought for under 90p.

Left to right, Northumberland County Chairman David Robson, Northumberland livestock board member Simon Bainbridge, Northumberland Crops Board Member Shaun Watson, Regional Livestock Board Chairman Hans Prksen and Northumberland dairy board member Dennis Gibb
Left to right, Northumberland County Chairman David Robson, Northumberland livestock board member Simon Bainbridge, Northumberland Crops Board Member Shaun Watson, Regional Livestock Board Chairman Hans Prksen and Northumberland dairy board member Dennis Gibb
 

It was important, he added, to encourage the British public to buy British produce - although a certain proportion of consumers, understandably, would continue to prioritise price over provenance.

As to the increased resilience offered by diversification, he said: “I think that would play a minor role. It’s very much a cut-throat business on the processing side.

“There is a certain amount of demand for locally produced food and there might be opportunities for farmers in some circumstances. Most, however, don’t have the time and it’s more important for them to make the core part of their businesses profitable.”

Diversification also involves considerable capital investment and risk, Mr Gibb said.

Indeed, renowned breeder and producer Michael Howie, milks 160 cows at Morwick Farm, near Acklington, said the farm’s ice cream business only represented around 1 or 2% of its milk production.

The Howie family has farmed at Morwick since 1945 and gained numerous show championships over the years.

Unfortunately, they were also hit by demise of the Durham-based processors Rock Farm Dairy several years ago - and now have further worries to contend with.

“Our price has dropped 10p in a year,” Mr Howie said. “We were at 34p this time last year and we’re now down to 24p.

“In the short-term it’s okay - you can ride it out - but you can’t go on like that. I’m optimistic, because if you’re not optimistic, what’s the point? But it certainly doesn’t look good.”

One solution, he suggested, would be the introduction of a mandatory minimum price, perhaps based on previous estimates that farmers need around 30p per litre to make a reasonable living from their milk.

“There should really be a margin built into the price,” he added. “Otherwise, this country could lose a lot more diary farmers from the industry.”

Neill Maxwell from Doddington Dairy
Neill Maxwell from Doddington Dairy
 

Also swayed by the market intervention argument was Bobby Maxwell of Doddington Farm in Wooler.

Although the business is well-known for its cheeses and ice creams, it too has taken a serious hit from the recent situation, with prices dropping from 34.5p per litre to 24p.

“It’s something that’s very concerning to farmers across the country,” Mr Maxwell said, adding that he had been interested in a recent radio discussion on the subject of a petition calling for a national milk price minimum.

“Some would argue the volatility of the market is good for efficiency,” he said.

“But when that volatility sees prices dropping from 40p to 20p, it’s not the kind of volatility that helps the industry.

“Farmers cannot plan. It’s a stab in the dark when you have volatility to this degree. There has really been no stability since the Milk Marketing Board was done away with.”

And it isn’t just this generation of farmers who are likely to be affected, he warned.

“It’s difficult enough to get people into an industry that requires them to work seven days a week, 365 days a year,” he said.

“If the industry is stable and people can see themselves progressing and making a good living, it’s a different matter - there’s a chance youngsters will have the enthusiasm to get into it.

“But at the moment, it’s hard going.”

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