September 7, 2011

 

UK's feed cost increment to affect dairy farmers

 

 

More Britain's dairy farmers are expected to leave as input costs rises but increasing herds should assure stable milk production, according to industry sources on Tuesday (Sep 6).

 

"Inputs have escalated on year. In the last 12 months feed has risen about 25%, fertiliser by 40% and fuel by 25%," David Cotton, chairman of the Royal Association of British Dairy Farmers said.

 

According to Reuters, Cotton said the average milk price paid to British dairy farmers had risen over the same period by about 8% and the UK was currently at the bottom of the EU's milk price league table.

 

He said a recent survey indicated 13% of farmers were planning to leave the industry in the next two years, up from 9% in a similar poll taken in 2010.

 

"Confidence in the dairy sector was dented earlier this year by significant increases in input costs coupled with inertia in milk price rises," said an agricultural specialist at Barclays Bank Plc.

 

"However, some farms, particularly those achieving good business performance and above average milk prices, have been investing in their businesses," he added.

 

Britain's dairy industry has been restructuring for decades with about 5% of farmers quitting each year as milk is provided by fewer, but larger producers.

 

The average size of a dairy herd in Britain is about 113 cows, a rise of about 23% over the last five years.

 

There are already some herds as large as 2,000 cows although a plan to build a much larger 8,000 cow unit in eastern England last year was abandoned following strong public opposition driven by concerns about the impact on animal health and welfare.

 

"The trend towards expanding herd size to achieve larger economies of scale is very real. Large herds can be managed to just as high standards of health and welfare as small scale operations," RABDF's Cotton said.

 

Research conducted by Barclays Bank showed that one-third of dairy farmers in England and Wales were planning to expand milk production over the next five years.

 

"There has been ongoing restructuring in this country's milk production for many years with a well-established trend for producer numbers to decline but coupled with an expansion in production for those remaining in the sector," the specialist of Barclays said.

 

Britain's dairy industry also needs to restructure in order to compete with EU giants such as Swedish-Danish cooperative Arla Foods and the Netherlands FreislandCampina, industry sources said.

 

"Consolidation among the milk buyers and processors is continuing to be absolutely vital if we are to reduce the inefficiencies within the supply chain because the volume of milk available is simply not going to grow," Cotton of RABDF said.

 

Britain's largest dairy cooperative, First Milk, announced earlier this month a joint venture with New Zealand's Fonterra to supply whey protein products to the European market.

 

"I'm convinced there is huge potential for exports but it does need the dairy sector to look outside the box," UK farming minister Jim Paice said.

 

RABDF's Cotton said legislation was currently holding back needed consolidation.

 

"The OFT (Office of Fair Trading) needs to take a more relaxed approach, not only with UK but also EU based companies, to provide them with the opportunity to grow without fear," Cotton said.