June 11, 2007

Slim profit margins, higher feed costs driving out UK dairy farmers
 

Slim profit margins are expected to drive out some 2,500 British farmers from the dairy industry over the next two years. Due to the growth in bio-fuel production, costs of cattle feed, including corn and soybeans, have risen significantly, further squeezing dairy farmers' profits.

Despite currently higher global dairy prices, the increase came too late for many dairy farmers. With liquid milk having only a short shelf life and little impact on global supply of milk powder, most UK dairy farmers have been unable to benefit much from the price increase.

Meanwhile, the higher raw material (milk powder) costs have dampened profits of dairy food manufacturers, including Nestle, Hershey and Danone.