Milk industry going down the drain

Dairy farmer Hugh Young fears for the future
Dairy farmer Hugh Young fears for the future

Dairy farmers across Galloway face an uncertain future as plummeting milk prices mean they are losing money daily by milking their cows.

A glut of milk added to fewer markets to sell to has lead to farmers receiving around 20p a litre, sown from 34p this time last year. The NFU (National Farmers Union) said last week that many dairy farmers are now selling at a loss as the cost of milk production is higher than this, at around 30 pence a litre to keep cattle well fed and looked after. Dairy cows totalled 184,683 in June 2010 of which 40% were located across Dumfries & Galloway (73,272).

The crisis recently took a dramatic turn when farmer co-operative First Milk told farmers it was delaying payments to help ease their cash flow problems.

Dairy farmer Hugh Young from Claunch Farm, Sorbie, who sells to First Milk said: “We have been told by First Milk that we will not be paid for the milk we produced in December fully until the 10th of February. They took this action to draw a line as milk prices are in freefall and this will give the market time to catch up. They hope this will stabilise the situation but if it doesn’t we are finished. First Milk’s action has been a wake up call across the whole industry.

The whole situation has been quite disconcerting and will get worse when the quotas finish on 31st March. After that you could see 200 dairy farmers nationally who opted for the higher price but shorter term option on offer out of contract.

“Milk is not the premium product it used to be and the supermarkets only use it as a marketing tool to get people into the shop, while selling bottled water at a higher price. Milk is also extremely perishable.

We now have a lot of surplus milk with no market for it as much of the export market is now closed and dairy imports are cheap.

The British milk industry has to go back to finding its core market and staying with them.”

NFUS milk committee chairman Gary Mitchell, who farms near Stranraer said: “All out farmers need to speak to First Milk to understand what is going on in the company. Some of them will be on a good contract with Nestle through First Milk but they are now being asked to put more capital into the company which will hit their cashflow. When the contract with Muller Wiseman was lost that was a big blow as all that milk was forced onto the commodity market. Although the situation is tough it looks like the market is now at the bottom and there’s a glimmer of hope that the Russian ban will come off in the autumn. That will bring confidence back as, globally, since 2008, Russia and China have grown from 6% of the market to 28%. They sneeze and we get the cold!

“I would also ask if farmers could be more innovative to meet the demands of our own market. In this country we only produce 85% of the dairy products we require. Half of the cheese eaten is imported and it’s not cheap cheese, it’s quality cheese. We need to move away from being fixated on liquid milk.”

Galloway MP Russell Brown commented: “The dairy industry is of massive importance to families and the local economy in Galloway. Dumfries and Galloway is the largest milk producing region in Scotland, and many dairy farms have been in families for generations.

“Action is drastically needed from both the UK and Scottish Government to show that they are on the sides of local producers and consumers, not the big retailers. The public are rightly asking why farmers are receiving between 22p and 27p a litre for milk when customers have to pay more twice that in a supermarket. We need a far tougher approach from the Government including new powers to fine supermarkets if they treat producer unfairly or illegally.”

Galloway MSP Alex Fergusson added: “While the recent disastrous drop in the price of liquid milk is largely down to international factors, such as the Russian ban on dairy product, which have resulted in a world-wide surplus of liquid milk and about which individual producers can do nothing at all, Governments at both UK and Scottish levels need to do everything they can to ensure that we don’t lose any more producers from the sector. I am pleased that the Scottish Parliament’s Rural Affairs Committee on which I sit is to hold a short inquiry into the situation starting next week, and very much hope that we will hear from the supermarkets and the groceries adjudicator as well as from milk producers and processors. All have their part to play in ensuring the future sustainability of this vitally important sector. Something is far wrong when liquid milk cannot find a market although 50% of our butter and 65% of our cheese are imported.”