Dairy farmers fear future as ‘perfect storm’ hits incomes

British dairy farmers are facing a “perfect storm” of falling milk prices, labour shortages and high costs of production outstripping revenue, leaving many fearful for the future.

NFU Dairy Board chairman Michael Oakes said most dairy farmers are being paid a milk price of 32-39p/litre, with cost of production lying around the mid-40s.

Addressing this week’s NFU Council meeting in Stoneleigh, Warwickshire, Mr Oakes said dairy farmer-members are raising doubts over the sustainability of their businesses.

See also: Dairy farmers urged to revise budgets as milk prices fall

“We have got high cull cow prices. Many farms have already run out of winter forage from last year,” he explained. “They are out grazing very wet ground, that also isn’t going to help with grass production going forward.”

‘Exceptionally worried’

His conversations with processors reveal many are also “exceptionally worried” about sustainability and future supply of milk going forward, especially into the autumn.

Explaining reasons for the dairy downfall, Mr Oakes said: “Ultimately, the market is the market. China hasn’t come back into the market at levels we thought it might, or sooner.

“There are slightly higher levels of [milk] production throughout Europe, the UK and the US. At the moment in the UK, it is running about 0.5% [up], but we are seeing about 0.5% reduction in demand due to the cost-of-living crisis.”

Consumers are also trading down from branded to own-label products, which is another factor hitting incomes, he added.

But Mr Oakes said global demand for dairy was forecast to grow and a new Dairy Export Taskforce would help the industry to develop new opportunities in overseas markets.

Farmer angst

Dairy farmers contacted by Farmers Weekly this week told of their concerns about the future.

Somerset dairy farmer James Hole said: “Following a good cycle, we are now witnessing an unpleasant one. The contribution of many problems, including ongoing high costs, labour shortages and weather restraints is causing uncertainty. Increased interest rates with inflation continuing to be out of control is also a factor.”

Wiltshire dairy farmer Hannah Chard said her milk price had dropped by 9p/litre over two months, but dairy products remain roughly the same price in supermarkets.

“Dairy farmers don’t want to be millionaires, they just want to go to bed at night being able to pay the bills,” she added. “We all love milking cows and want to carry on, but we just cannot do it for absolutely no return.”

Increased costs

Becki Leach, a senior consultant at Kite Consulting, said dairy farmers are facing increased costs due to the wet spring, a low carryover of forage stocks and labour shortages.

Kite calculates the current breakeven milk price is 41-43p/litre.

“We anticipate an additional cost of at least 2p/litre will be needed for dairy farmers to cover sustainability requirements in the medium and long term,” Ms Leach added.

“This would ensure dairy farming businesses can meet sustainability requirements for the environment and also ensure a sustainable workforce.”