Dairy margins under pressure
It follows new analysis from AHDB which highlights how the milk to feed price ratio for some producers is at a level which historically has led to reducing milk production.
A Co Down dairy farmer told Farming Life that he is only treading water at the present time.
He explained: “Eighteen months my cost of production was 28.5 pence per litre. Since then my feed bill has risen by £40/ton, fertiliser is up £50/t, red diesel is up by 18 pence per litre and my electric bill has increased by 17%. These are all more than significant increases.
“The feed hike has put another one penny per litre on my cost of production while the other increases have added the same again.
“This puts my current cost of production at 30.5 pence per litre. Yes my milk price has risen over the past few months. But the increase is no more than covering the hike in all my input costs.”
NFU dairy board chair Michael Oakes said: “We have previously highlighted the ‘haves and have nots’ when it comes to dairy contracts.
Even those on the best performing contracts will be struggling to keep up with the rising bills.
“For those on the least favourable contracts, we know it means that many may consider cutting production or leaving the industry. Milk prices may now be improving slightly, but those on certain contracts will have been suffering losses for a while now, which is unsustainable.”
NFU Scotland milk committee chair Gary Mitchell said: “I know a number of farmers in Scotland and further afield were receiving below the UK average farmgate milk price for April 2021. The AHDB data is clear; milk supply is likely to suffer if this trend of cost to income is not rectified.
“For too long dairy farmers in the UK have been asked to produce a quality product at an unsustainable price - one which inhibits on farm investment and a profitable return for the primary producer. The whole supply chain, from cow to consumer, must recognise the severity of this situation.”
NFU Cymru milk board chair Abi Reader said: “Compliance with a huge array of standards is constantly in milk producers’ minds, to meet consumer demands and trust in the UK’s amazing safe and trusted dairy products. Although those standards are very important to our industry, it comes at a cost and those producers with milk prices below average will be hardest hit.
“A current case in point here in Wales are the extra costs of meeting Water Regulations recently introduced by the Welsh Government and the steep rise in building material costs across industry post-Covid, not to mention feed and fertiliser input prices.”
UFU dairy chairman Mervyn Gordon said: “Here in Northern Ireland we are facing the challenge of constantly rising variable input costs which is seemingly relentless and impacting upon the profitability of many of our dairy farms.
“This expands beyond traditional dairy inputs to include many general and capital items needed to run a viable dairy enterprise.”