September 12, 2007

British dairy prices need to rise a bit: Promar analysts

British milk products need a price increase of at least 3.7 pence per litre (ppl) to secure its future, according to the latest farm analysis from Promar Farm Business Accounts (FBA).

This figure will increase average yearly farmgate prices to 22 ppl which Promar say is necessary to secure the minimum necessary profits for a dairy farm.

The comprehensive survey sampled 118 specialist dairy farms from around the country in an attempt to illustrate the challenges that face the industry.

Promar Regional Consultant Andrew Thompson said the results this year demonstrate the "real extent of the problems being faced". The year to March 2007 was horrendous for dairy farmers with a range of factors combining to exert huge downward pressure on margins, he said.

Milk prices continued to fall while production costs rose. As if that was not enough a severe drought lead to increased purchased feed use, both concentrates and forages, while yields fell, he added.

According to the survey, the average farm made a profit of just under GBP15,000 (US$30,490) on a turnover of GBP320,000 (US$650,463) for the year ending March 2007.

Thompson said that the figures were unacceptable adding that if subsidies were removed farms would not even make a profit.

Thompson said the average farmer received grants and subsidies of over GBP32,500 in the year and if these are removed, the result is a trading loss of nearly GBP18,000 and this is totally unacceptable.

Recent better prices have encouraged the industry but Thomson said that the industry needs sustained prices throughout the whole year in order to achieve a realistic profit level.