United Kingdom-Dairy farmers lose confidence.
LACK of confidence among dairy farmers is a key cause of the decline in UK milk supplies.
A new report warns that recent price cuts, and the likelihood of more to come, will result in that downward trend continuing. DairyCo warns that could have a knock-on effect with processors reluctant to invest in a contracting industry, ultimately putting British dairy farmers at a disadvantage.
Production in 2007-08 was the lowest for 30 years, although price rises last year saw dairy farmers confidence begin to return.
However, DairyCo says that confidence was extremely fragile and could quickly disappear following recent price cut announcements.
Huw Thomas, DairyCo head of market intelligence, said: "Analysis implies that the majority of dairy farmers planning to stay in the industry for the long term are already operating their farms at full capacity.
"To expand their business further, and help increase national milk supply, many in this group will need to incur significant amounts of capital expenditure - market signals are not giving them the confidence to do that."
The DairyCo report, "Factors affecting milk supply", looks at issues that have affected cow numbers and yields, the two factors that govern milk supply.
It examines their past and predicted future effect -including the influence of TB, genetics, breeding, fertility, cull cow prices, forage quality and weather.
The report says other key points that affect milk production include:
- the insufficient number of replacement animals available. It expects this will change from 2011 but the extent to which it will increase milk supply will depend on farmer confidence;
- dairy farmers and milk buyers will need to work together to improve milk price contracts to better communicate the needs of the milk buyer;
- the entire supply chain needs to develop relationships that mitigate the effects of price volatility. This will allow cashflows to be managed and plans to be made to further improve efficiency on farm.
The report says that giving dairy farmers the confidence to expand would have a positive impact on building a sustainable milk supply for the future. However, if confidence is knocked and margins become tighter, it is possible that the larger, more progressive, business-minded dairy farmers will leave the industry potentially having a substantial impact on national milk supply.
Previous DairyCo analysis of milk production for 2007/8 showed the production gap was growing between larger and smaller producers.
Only 25pc of Britain’s dairy farmers produce more than one million litres annually, contributing over half of the national milk supply.
Other highlights of the report include:
- the number of milking cows in the UK aged two years or more has declined by 4.5pc to 1.909 million since 2005 a fall of 89,000 head
- although continuing to increase between 2008 and 2010 the number of available dairy replacements is not expected to be enough to completely stem the decline in the number of milking cows
- in the 2007/08 milk year it is estimated that 16,192 dairy cattle were slaughtered as a result of TB testing equivalent to 114 million litres of lost milk supply
- it is estimated that for every farmer leaving the industry only 80pc of the cows remain in milk production the rest being culled as a result of being un-saleable or too old
- it has been predicted that cows born in 2009 will no longer make significant genetic progress for milk yield.
