July 5, 2012

UK dairy farmers lose US$1,600/week on milk price

The price paid to some UK dairy farmers for milk are leaving them out-of-pocket to more than GBP1,000 (US$1,600) per week on average due to depressing new figures of the cut in milk price.

In the past week three of the UK's biggest milk processors have imposed a fresh wave of cuts to how much they pay for milk. The NFU Tuesday (July 3) strongly condemned the latest round of milk price cuts.

"This price slash comes at the expense of the average dairy farmer who is now making a significant loss for every litre they produce", said NFU dairy board chairman Mansel Raymond.

"I echo the call made by one major producer group, Dairy Crest Direct, that this now amounts to a combined profit warning for the overwhelming majority of dairy farmers in this country. All producer representatives must now stand together and fight to restore profitability." In the past seven days Robert Wiseman Dairies, owned by Müller Dairies, Arla Foods UK, the UK subsidiary of Arla Foods Amba, as well as Dairy Crest, announced cuts to their milk prices paid to farmers as of August 1 of GBP0.017 (US$0.03) per litre, GBP0.02 (US$0.03) per litre and GBP0.0165 (US$0.026) per litre respectively, following further significant cuts in recent months. David Herdman, chairman of Dairy Crest Direct, has calculated the devastating effect this will have on farmers.

He said, "This latest GBP0.0165 (US$0.026) per litre cut to our members, which comes on top of a GBP0.02 (US$0.03) per litre cut in May, will deliver a completely unsustainable milk price. In fact, we estimate the deficit between milk price and production cost to be GBP53,000 (US$82,630) a year for our liquid suppliers. It is for this reason that we are issuing a profit warning loss of GBP35 million (US$55 million), for non-aligned DCD producers."

Chairman of the Arla Foods Milk Partnership, Jonathan Ovens, said: "Farmers simply cannot afford to go into the winter making a loss of GBP0.05 (US$0.08) per litre."

Raymond said, "For me, this just typifies everything that is wrong with this market place. It is time for liquid milk processors - and retailers and other major buyers - to take responsibility for this totally dysfunctional supply chain. It fails to address the one basic need of any business - the need to cover costs and make a profit."

Dairy Crest said the cut was regrettable, but due to continuing tough market conditions. However, it added a commitment has been given to these farmers that there will be no further reductions this year, and it would look to increase the price again as soon as market conditions allowed. It confirmed the milk price for its Davidstow contract will not change.

A member representative said that GBP53,000 (US$82,630) Dairy Crest farmers losses per year.