According to industry analyst Ian Potter, an analysis of milk volumes UK-wide confirms that production in the first three months of 2017 is down compared to 2016, although it has caught up in the past week week on a like-for-like basis.
“At least two milk buyers are concerned about the effects any spring price cuts will have on production in the second half of this year, and the potential permanent damage to their supply base,» said Mr Potter. “To my mind all UK milk purchasers must recognise they are on a knife-edge in terms of safeguarding their long-term milk supply base.
“Couple that with volatile milk prices and the almost inevitable haircuts to farm incomes that will come after Brexit, and I reckon the next two years will see a serious exodus of dairy farmers who have either had a gut full of working for less than nothing, or will have an exit managed by others to whom they owe substantial amounts of money.»
Many farmers were still «on their knees», he said, unable to cope with the wide swings in volatile milk prices and still to even start recovering from the last price slump.
«Then there is the scourge of TB and the fact the image of our industry is constantly under attack from powerful well funded anti-milk and anti-livestock farming organisations who are chipping away at demand for our fresh products – especially among the easily influenced young people,» said Mr Potter.
«I reckon a brief period of spring and summer price cuts will confirm to many farmers that it’s time to quit, whilst others will bury their heads in the sand convincing themselves and their family that it can’t get worse and that the next 10 years will be more profitable than the last.
“The only factor which may stop the exodus is whether alternative enterprises are even worse,» he added.
Those who do stay in milk production will have to become internationally competitive, as UK milk prices begin to converge with world dairy prices. To survive and prosper producers will either have to continue to cut costs and be on top of their game or have deep pockets,» said Mr Potter.
Explaining this week’s price cut, Muller’s agriculture director Rob Hutchison said: “Whilst the nature of our business and focus on adding value protects our farmers through a more stable milk price than one driven by the commodity sector, we must ensure we reflect key changes in the market environment.
“We have reviewed our position with the MMG board who are understandably disappointed by a price reduction but understand the market environment we are working in and our commitment to pay a competitive milk price. We will continue to work with the farmer board to review our position.”
It is understood that only six farmers out of the 1900 signed up to Muller have yet to sign its new contract, which kicked-in from May 1.
Source: The Scottish Farmer
Link: http://www.thescottishfarmer.co.uk/news/15285089.Milk_supply_on_a___39_knife_edge__39__as_Muller_cuts_price/
