February 10, 2011

High grain costs to speed up UK dairy's sector decline

UK dairy farmers face new challenges for 2011 as soaring grain costs put pressure on their already tight profit margins, the head of the Royal Association of British Dairy Farmers said Wednesday (Feb 9).

A study by the National Farmers Union released earlier this week found that dairy farmers lose an average of 3.16 pence for every litre of milk produced every year. With 11 billion litres of milk produced annually across the country, this equates to an overall loss to the sector of more than GBP330 million (US$531.28 million).

Much of this deficit is down to rising feed and bedding costs. Feed prices are forecast to rise by 16.6% in 2010-11, while bedding is already 13.8% more expensive than a year ago.

David Cotton, chairman of the RABDF, said financial pressures are set to worsen for many farmers this year as they combat ongoing high grain prices. "It's a constant challenge to offset the cost of production against returns for your pocket," he said.

"A lot of people will have bought their food forward but unless the price of milk rises the cost for farms will be significantly higher until next winter."

Feed wheat futures in London are trading at record highs of over GBP210 (US$338.09) a tonne as surging international prices and the rapid pace of UK exports has pushed up prices.

Cotton said the average dairy farmer, who produces around 6,000 litres of milk a year, can barely make enough to keep the business running. "People are leaving the profession at the rate of about 4% a year. It's getting to the point where you think: will farmers keep reinvesting if they can't see a future?"

According to new figures from industry body DairyCo, the number of dairy producers in England and Wales in December 2010 stood at 11,041, a fall of 461 on the year before.