DairyCo report encourages supply chain to work together to improve farmer confidence
With concerns over the long term sustainability of the domestic dairy industry, DairyCo’s new report issued today (30 March 2009) sets out all the major factors affecting the supply chain and the implications of continuing falls in milk production.
Ensuring a sustainable dairy supply chain outlines where the industry stands today, including the most recent price trends and margins. It also presents the headline findings of the annual farmer intentions survey with estimates of future production levels.
As seen in other industries, such as steel, oil and coal, it is normal for the primary producer of a commodity product – as farmers produce raw milk – to bear the vast majority of the price volatility within a supply chain. However, the current price fluctuations due to imbalances in global supply and demand may, in time, prove unsustainable for the British dairy farmer, following a long period of underinvestment on farm.
Worrying statistics included in the report (now in its fourth year and proving to be an accurate assessment each time) show 14% of dairy farmers responding to the February/March 2009 intentions survey stated they will leave the industry within two years and only 18% said they have the confidence to expand.
Huw Thomas, head of market intelligence at DairyCo says: "If these farmers do what they are saying, UK milk production will fall to 12.1billion litres by the 2010/2011 milk year as there aren’t enough farmers planning on expanding their businesses to compensate for the production lost by those leaving.
"If this trend continues, by 2030 UK production could be just 7.5billion litres meaning over 50% of our dairy products will have to be imported."
The report acknowledges the positive improvements made in the industry in recent years, for example the establishment of dedicated retail supply chains. However, it also indicates a need for all parts of the dairy supply chain to recognise the vulnerability of the supply base and work together to build farmer confidence. This would boost domestic milk production and provide a platform for a sustainable dairy industry.
Mr Thomas says: "All participants in a supply chain have a vested interest in maintaining it in order to provide the consumer with what they want and make profits from doing so. If the supply chain works together to ensure the chain remains sustainable, then there can be continued investment in increasing efficiency and development of new products throughout the chain, as well as securing future supplies which will help to safeguard against issues of food security and protectionism by other countries."
