Recent milk price cuts have wiped an estimated £800 million from the annual income of UK dairy farmers.
But it’s not all negative. Last week we had some positive news from Arla, holding their milk price based on their transparent formula.
I’m hopeful that others will also hold or have smaller price drops this side of Christmas. This will give our farmers much needed breathing space and draw a clear line in the sand.
Confidence in any industry struggles when there are a lot of ‘unknowns’, and dairy is no different.
Some scaremongers are talking prices down towards 20ppl, based on Actual Milk Price Equivalent (AMPE). But let’s look back a minute – when AMPE was 39ppl our milk price peaked at 34.5ppl – all because of our “focus” on strong national brands and the domestic retail market. So if we don’t benefit from high AMPE’s should we really suffer the lows?
We are increasingly part of a bigger global market, but our strong domestic situation should give us some protection from the very highs and the very lows.
Nonetheless, it’s going to be a tough twelve months. The smart money is on improvement in the second half of 2015 - let’s not talk the price down even further before then.
As farmers we need to put plans in place to cope with increased volatility. It is important that farmers talk to their processors and understand what factors impact on their milk price.
Asking questions and staying in contact is vital. Processors should be giving farmers the correct market signals and investing in measures that can deliver value.
We have come a long way in establishing more transparent pricing mechanisms, but this is a job which is never done. The NFU will continue to lobby processors and retailers to increase fairness across the supply chain.
We will also be accelerating our work on futures and other market mechanisms alongside industry partners. When established, this will take some of the risk out of volatile prices for new entrants and those investing in their future.
Over recent years we have benchmarked our farmgate price in the UK against other EU countries to ensure that we are competitive. Official data is often out of date so we continually talk to farming unions in other countries to stay current.
At the moment, information from European colleagues show that we still have a competitive price and are not dropping behind.
As all EU countries, and many around the world, are affected by this period of low prices, we are working hard in Brussels, and with the UK government, to ensure that any market solutions are joined up and effective. This is what will ensure we come out of this difficult period stronger with a bright future for UK dairy.
There are big opportunities to get consumers to eat more British cheese, butter, milk and yoghurt, as dairy is loved across the UK, but often underappreciated for its nutritional benefits.
The UK is not self-sufficient in this sector and better labelling, support for exports and import substitution will be important over the next few years. As an industry we need to promote dairy and get more consumers to enjoy and value the great products we produce.
Despite the great opportunities for dairying over the next decade it won’t be a smooth ride. We need to make sure that our farmers, whatever system they operate and whoever they supply, get through this difficult time and have the opportunity to be part of the thriving UK dairy industry that we all strive towards.