Scotland-The dairy crisis.
SCOTLAND -THE DAIRY INDUSTRY.
IT’S now official: the Rural Payments Agency has confirmed that milk production in the UK during the year to 31 March was the lowest since 1971 and shows every sign of declining still further as farmers find themselves caught in vicious squeeze between processors and supermarkets. The RPA’s figures, though still rated as provisional, show that, during the last milk year, total UK production was just 1.12 billion litres.
Under EU regulations, the UK has an annual production quota of 13 billion litres. If output exceeds that level then producers are subject to a swingeing levy on each additional litre. However, it is many years since dairy farmers came anywhere near approaching the quota limit. The fact is that overall production in the last 12 months was around one million litres per day less than the previous year.
Ian Potter, a leading industry analyst, said: "While lack of confidence is clearly a factor in these figures, bovine tuberculosis must also be a significant factor in reducing national production and will eventually lead to more factory closures."
The department of the environment, food and agriculture (Defra) has calculated that the average UK ex-farm price in February was just 24.25p per litre compared to 25.62p a year earlier. The consensus is that producers need much closer to 30p per litre to make a reasonable margin and allow for future re-investment.
One of the ironies of the current situation is that dairy cattle, both commercial and pedigree, are commanding exceptionally high prices through auction marts because of a lack of female replacements, believed to be a result of farmers inseminating their cows with semen from beef breeds, such as Charolais, Simmental and Limousin. Pure Holstein bull calves have virtually no commercial value and many are shot on farms shortly after birth. However, beef cross calves for future rearing are worth up to £200 per head.
Cull dairy cows are also commanding a decent price at the end of their productive life with much of the beef from these animals subsequently exported to mainland Europe. The weakness of sterling relative to the euro has seen UK cow beef become increasingly attractive to European buyers.
Meanwhile, the classified advertisement sections of the specialist farming press continue to carry announcements of impending dispersals. Among that number is the sale of the 450-strong herd of Holsteins at Crickley Farm, near Crewe. The sale will staged be over two days with the adult portion coming under the hammer today with the younger cattle due to be sold tomorrow.
The Crickley herd is one of the top units in England with an average yield of over 9,500 litres, based on a relatively low cost production system. The Moore Partnership, which established the herd in 1952, made only one comment: "We are ceasing milk production." Unless there is a significant improvement in ex-farm values, then many more herds will be dispersed over the next few months.
However, tough as times may be for UK producers, the situation in the Republic of Ireland is even more acute. Dairy herds in Ireland tend to be smaller than in Scotland, but last week an estimated 2,000 producers staged demonstrations.
Glanbia, one of the leading buyers in Ireland, recently announced that it is cutting its price to farmers with immediate effect to just 20 cents (18p) per litre.
Robert Shearlaw, the vice-chairman of First Milk – the farmer owned business with over 2,500 members in Scotland, England and Wales – is concerned.
He said: "While at last there have been some positive signs that prices in the commodities market have bottomed out, most analysts are predicting that it will be the autumn before we see any sustained upward moves.
"You might think that we have seen it all before – but I don’t think you have. This is the first time I can remember the market returning unsustainable prices to farmers right across Europe, the US and in the southern hemisphere. The political and market implications of this scale of unsustainability are huge."
