DairyCo Report

A report commissioned by DairyCo and undertaken by The Andersons Centre and the University of Nottingham has dispelled three common myths within the dairy industry and found that the presence or absence of a successor is the biggest single factor affecting change within the sector.

In undertaking the report entitled The Structure of the GB dairy farming industry – what drives change? It was found the common myth that the UK dairy industry is unique was not true.  Results from the study show that the rate of change (declining producer and cow numbers, combined with increasing herd size and yields) in the UK is about average for the original 15 EU Member States.  The second myth that is often assumed is that larger units are forcing smaller units out.  The study found no evidence of this.  Its results show that larger units have the potential to make higher profits (achieve a lower cost of production), but they don’t necessarily do so.  The report finds there is a range of profit levels amongst farms of all sizes, which is more to do with management than size.

The report found that the final myth ‘milk price is the main driver for exiting the industry’ was not true either.  Although milk price was an ‘important and high profile economic indicator’ there was no ‘significant’ link between price and the rate at which producers left the industry.  

The report found there were a number of factors which drive changes within the industry and no two businesses were the same.  The study split the factors affecting change into two – Social and Economic drivers.  Social drivers included succession, age and education.  Economic drivers include profit, cost levels, milk price, herd size and family labour use.

Of the social drivers one of the biggest single factors affecting business intentions is the presence or absence of a successor.  Those with a successor were more likely to be looking to increase production, whilst those without were more likely to be looking to exit the industry.

Meanwhile there was found to be no correlation between herd size and milk price.  Milk price is widely believed to be one of the major factors influencing farmer intentions, but the report found those receiving a higher milk price were no more likely to expand than other producers.  Similarly herd size was not seen as a significant factor in decisions to expand or exit the industry.  A summary of the report can be found at http://www.dairyco.org.uk/news/news-articles/january-2013/succession-is-key-to-the-future-of-dairy-farming-businesses/