Dairy Crisis

As farmer protests continue across the UK, it is hard to see where any immediate relief in the dairy industry will come from.  The latest Global Dairy Trade (GDT) auction results, seen as the ‘dairy barometer’, shows the overall weighted average index has fallen by a further 9.3%.  This is the tenth fall in a row and is now at a thirteen year low.  SMP, WMP and butter all recorded drops in prices by 14.4%, 10.3% and 6.1% respectively.  There was a 78% increase in the volume of WMP on offer and although volumes usually increase at this time of year, this is considerably outstripping demand, which has by contrast fallen.

There seems to be a perfect storm; weakening demand from China, an extension to the Russian ban on imports coupled with an increase in global dairy production; none of which look set to change any time soon.  Many farmers across the EU invested heavily in order to be able to increase production after the end of quotas and are unlikely to reduce cow numbers in the short term.  In the US, unless feed prices rise it is difficult to see production decreasing much.  Although, there are reports from New Zealand that production may start to ease over there.  Milk prices have fallen even further in NZ and higher environmental regulations introduced are making the situation even more difficult for dairy farmers, but any reduction in production will not be immediate as they are currently in their spring flush.

At the most recent Milk Market Observatory (MMO) meeting there were calls for action from the Commission, a deviation from the usual monitoring of markets.  Members asked for the Commission to look at the Intervention price, support to ease cash flow and also ways in which to regulate the supply.  Nearer to home the four farming unions held an emergency summit on 10th August, in an aim to highlight to the farming ministers the seriousness of the situation and also to find ‘urgent and practical solutions’.

In the mean time, farmgate prices keep falling, some of the key ones can be found below:

• Dairy Crest liquid contract suppliers will receive a 1.4ppl price cut from September, however Dairy Crest Davidstow suppliers fair much better seeing their price, which increased by 0.25ppl last month,staying the same for September.
• Muller Wiseman suppliers face a 1ppl drop in August followed by a further 0.8ppl fall from 7th September, taking the standard litre to 22.35ppl.
• Arla suppliers will receive 23.01ppl from August, a 0.8ppl cut.
• First milk announced a 0.5ppl cut from 1st August (with less than a days notice). This takes the The Midlands & East Wales balancing Pool to 18.1ppl and the Lake District  contract to 19.70ppl.