June 17, 2009

Milk production in the UK is likely to fall five percent this milk year as dairy farmers' confidence are ebbed away, according to the latest Farmer Intentions Survey from DairyCo.

The survey showed that only 18 percent of dairy farmers plan to increase production in the next two years, compared with 35 percent in the same survey a year ago.

DairyCo said the 18 percent is insufficient to cover the lost production from the 13 percent of milk producers who intend to leave the industry. As a result, milk production is expected to fall to 10.5 billion litres by 2010-11.

The survey also showed that nearly half of British farmers have space available for extra cows, which if full, annual milk production could increase 5.4 percent to 11.6 billion litres.

The clear drop in farmer confidence raises serious concerns for the industry, said Helen Eustace, acting head of DairyCo market intelligence.

The confidence drop suggests that while milk prices remain relatively high, high production costs and underlying uncertainties on issues such as the current declining milk prices are undermining farmer confidence, Eustace said.

The survey also highlights falling levels of investment on-farm with nearly 60 percent of farmers having less than GBP25,000 (US$41,049) to invest over the next five years.

But the survey also noted that 80 percent of the farmers who plan to stay in the industry for the next two years, believe their dairy units will still be running in 10 years' time. This suggests a considerable slowdown in the rate of farmers leaving the industry, provided that confidence and profitability are sufficient, the report said.