Farmers not investing

The majority of British dairy farmers are planning little capital investment over the next five years indicating a lack of confidence over their longer-term futures in the industry, according to MDC's latest Farmer Intention Survey.

This year's survey of 682 UK milk producers confirms investment has become a key issue with most farmers only planning on spending money on general maintenance.

However, at the other end of the scale, there are farmers who are preparing to invest over a quarter of a million pounds over the next five years. These farmers have invested significantly in the past and intend to carry on growing their enterprises.

The survey confirms more farmers are making proactive decisions about their futures as issues surrounding CAP Reform and decoupling of support payments become clearer.

The number of farmers planning on increasing production over the next two years has grown slightly to 26%. They include younger farmers, farmers producing over 1 million litres of milk per annum and those with dairy only farms.

This is countered by more farmers deciding to leave dairying altogether with 14% intending to cease production over the next two years. There are fewer farmers who have yet to make a decision on whether to carry on or leave the industry - 14% now compared with 21% in 2004.

Ken Boyns, head of MDC Economics says: "If farmers do what they say they're going to the net effect will be a fall in production of around 400 million litres by the 2007-2008 quota year. There are more farmers leaving the industry and not enough farmers increasing production to avoid this.

"All the elements of the survey seem to suggest a change of pace in divergence in the industry with some farmers investing heavily in future production capacity while more are planning on leaving."