Continue to be battered by bad news

Dairy farmers continue to be battered by bad news as the milk price continues to tumble although it is not an even playing field across the many different milk supply contracts on offer.

Worst hit at present appear to be farmers supplying First Milk which is a farmer owned co-op whose suppliers/members seem to be badly exposed to the world milk commodity prices which also continue to fall. Suppliers of First Milk have received the unwelcome news that the price for their liquid milk and manufacturing contracts will be falling by 1.4p/litre and 1.8p/litre respectively in December to 22.7p/litre for liquid and 24p/litre for manufacturing milk.

Many of the other milk buyers have also announced cuts including Arla, which has reduced the price for its farmers on their “direct supply” contract by 3p. These farmers are not Arla members and perhaps as a consequence of this, Arla has chosen reduce their price milk rather than that paid to its members, explaining that the direct supply milk was surplus to retail demand and was therefore only attracting commodity prices.

Thus, although all farmers will be affected by the fall in milk prices some farmers are being disproportionately badly affected. In light of this it seems to me that getting on the right milk contract is probably one of the most important business decisions many dairy farmers should be considering and I cannot see how farmers supplying a buyer such as First Milk will survive for any length of time with a milk price as low as 22.7p/litre.

Indeed I would imagine this must bring in to question the sustainability of First Milk as a business because I can only imagine many of their suppliers, despite being owners of the business as well as suppliers, will be seriously looking at their options, whether that be looking to switch to another milk purchaser, or perhaps even stopping dairy farming altogether.

The Chairman of First Milk, Jim Paice who previously served as farm minister in DEFRA during the peak of the milk price protests in 2012, blamed the price cuts on a drop in returns for liquid milk and cheese in the past month.

“With cheese specifically, this impacts not only on what we are selling now, but on the price that we can sell our cheese stocks for in the future,” added Jim Paice.

But even so, it must be galling for First Milk members to see other dairy farmers still being paid nearer 30p than 20p/litre for producing exactly the same product.  

James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk