May 19, 2006

More UK dairy farmers leaving industry, consolidation expected

14 per cent of UK's milk producers plan to leave the industry within the next two years, according to a survey of 682 British milk producers by the Milk Development Council (MDC).

If that happens, there would be a fall in production of around 400 million litres by the 2007-2008 quota year, said Ken Boyns, head of economics at the MDC.

Britain's dairy producers have long suffered falling prices and consolidation of the industry is widely expected.

Tim Smith, chief executive of dairy processor Arla UK, said recently that reducing Britain's milk production could help those remaining gain more efficiency and profits while diminishing the present glut in supplies.

The National Farmers' Union (NFU) also conceded that more consolidation would be necessary to maintain efficiency and competitiveness due to EU reforms to the Common Agricultural Policy.

Milk prices in Britain are the lowest out of the 15 pre-accession EU countries.

The survey also discovered low levels of investment, with more than two thirds of the producers planning to invest less than GBP25,000 (US$47,300) during the next 5 years, an indication of the lack of confidence in the sector's future. 

While some are leaving, there are those who plan to invest more-- one in ten farmers said they would invest at least GBP100,000 (US$189,000) in farm development over the next five years.