The farmer protests in Brussels

The farmer protests in Brussels remind us that the problems facing our dairy industry are EU-wide. Indeed they are worldwide as supply is outpacing demand.  

This is bad news for everyone other than the consumer but ironically, at least in this country, I suspect many shoppers would be happy to pay more for their milk if this helps our dairy farmers survive.

However, with supermarkets facing fierce competition they are desperately trying to attract more customers into their shops and a price war on milk has been one of their battle grounds. 

Some movement has been seen in recent weeks with various supermarkets agreeing to pay more for liquid milk and milk being made into their own brands of cheese. But this still leaves many of our dairy farmers producing milk at less than the cost of production which cannot last for long before farmers are forced to quit the industry.

It is the impact these prices have on an individual farmer’s cash flow which is crippling those who do not have sufficient financial resources to survive a downturn such as this.  

That is why the EU has agreed to make 500m euros available for dairy farmers across Europe to help relieve this cash flow crisis.  It is likely this will translate in to around £29m in the UK but my fear is that we will now enter a prolonged argument as to how this money should be allocated with the result that by the time it is eventually paid, it may be too late for some businesses.

When such payments have been made in the past they have usually come on a flat rate basis to every farmer which makes it easier to get the money out quickly.  However, because there is such a broad range of milk prices being paid to dairy farmers I believe this money should be focussed on those receiving the lower milk prices.

Such decisions, and the mechanism for payment need to be agreed quickly and I urge government ministers in DEFRA to focus their efforts on getting this money out as soon as possible. 

They must also continue to fight EU bureaucrats to relax the rules and allow the new Basic Payment Scheme funds to be released as early as possible in England where it is currently feared technical checks may hold up payments when farmers are struggling across all sectors, not just the dairy industry.


James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk

Milk protests have been stimulated

Although some supermarkets are now guaranteeing to pay a minimum price for liquid milk, they have given no such assurance for the price paid for other dairy products made from milk such as butter, yoghurt or cheese. These products account for around half the milk produced in this country -- so providing guarantees on the price paid for liquid milk is only half the story.

This has stimulated milk protests across the country and farmers have blockaded the massive Morrisons depot near Bridgwater. Farmers for Action (FFA) decided to shut down the depot for a second time in a week because Morrisons turned down their request to bring forward talks on the price it pays dairy farmers for milk used to make cheese.

But it is not as simple as that. I am no expert on the milk supply chain but I do know there are many different brands of cheese and other dairy products supplied to supermarkets, and I don’t see how Morrisons or any other supermarket can control the price that all these cheesemakers pay for their milk.

Supermarkets could of course pay cheese makers more for their cheese on the basis that the makers then pay their farmers more for the milk. The price paid for cheese is obviously the fundamental point but even then it becomes increasingly complicated in that unless the cheese producer supplies all their cheese to just one retailer, it will be difficult to ensure the higher price filters back to the farmer in full.

The plight of cheesemakers themselves was also brought in to focus by the news that Cricketer Farm near Bridgwater has announced it will halt production in early 2016 after more than 60 years.

Around 20 farmers used to supply this cheesemaker with milk and they will now be hunting for a new milk buyer which will not be easy in an oversupplied market.

Cricketer Farm blamed their plight on the turmoil created by global milk oversupply and the damaging effect of the strong pound on exports. They said: “Market volatility has forced the UK dairy market into a period of uncertainty and consolidation, which is reshaping the industry to be dominated by international dairy powerhouses, focused on global strategies.”


So the pain pervades the entire dairy supply chain and it is not just dairy farmers themselves who are facing difficult times.

Unless some form of price guarantee can be introduced, the whole dairy supply chain from farmers, through processors will look very different in a year’s time and I hope the supermarkets and government realise the consequences of this sooner rather than later.

James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk