Dairy farmers’ concerns over their future prospects
In 2015, Britain’s long-suffering dairy farmers finally snapped. Having peaked two years earlier at around 35p per litre, the price of milk at the farm gate had plummeted by more than 30pc, prompting protests at supermarkets and distribution centres around the country.
“We went through a very tough time where the prices were very, very low,” says Chris Gooderham, an analyst at the state-backed Agriculture and Horticulture Development Board.
“At a time when you would expect milk production to be reducing across the globe, it was actually increasing, and as a result, although the prices were going down, farmers globally produced more milk, so the prices stayed low a lot longer than you would normally expect them to.”
After hitting rock bottom at around 20p, prices rebounded to reach record highs towards the end of last year. But with uncertainty over future prices, a big surge in the popularity of alternatives such as soya milk and lack of clarity over Brexit’s impact, farmers could be in for a rough ride yet.
Paul Tompkins is a first-generation farmer who milks 250 cows with his wife at their farm in the Vale of York.
“I kind of fell into it, but haven’t looked back since,” he tells The Daily
Telegraph. “We do start early and finish late but especially at this time of year it’s not that difficult to get out of bed when the dawn chorus is going.”
While he says the resurgence in prices has made things “more comfortable”, price volatility remains a big challenge, playing havoc with cash flows and making it harder to decide when and what to invest in.
“It’s unprecedented to see us going from such lows to such highs to such lows again in the history of milk production. I can buy the food over the next year, I know what the labour costs will be, I can even secure the cost of bull semen, but the one thing I’d have no confidence on is what price I’m going to get for my milk.”
Britain’s newfound taste for alternative milks could also prove a threat. Rude Health, which supplies the likes of Tesco, Sainsbury’s and the Co-op, has seen sales of its dairy alternatives soar 50pc in the past year and expects them to account for more than £30m of revenues in two years.
Nick Barnard, who started the company with his wife Camilla, said consumers are looking for alternatives to dairy milk for two reasons.
“One is the fact it makes them feel less good – they get bloated or they can’t digest it. Secondly their concerns about the welfare of the farming regime that produces cheap milk.”
The two sectors have been locked in a furious row in the US, where dairy lobbyists are calling for a ban on vegetable milks being described as “milk” and their derivatives being labelled “butter” and “cheese”.
Similar rules already came into force in the EU last year, forcing Rude Health to call its products “peanut drink”, “hazelnut drink” and such. But Barnard says: “It’s just semantics, it’s never held us back”.
The UK market grew by around 50pc between 2011 and 2016 to 180m litres, according to Informa analyst Jana Sutenko, and shows no sign of slowing. But it remains small in absolute terms and is yet to make a perceptible dint in overall milk sales, which have continued to grow by one or two per cent per year.
Dairy farmers are also keen to get more clarity over how agriculture will be affected by Brexit.
The EU’S controversial system of milk quotas was abolished in 2015 and dairy farms tend to be less reliant on EU subsidies than others; in Tompkins’s case they account for just 2pc of revenues.
But the European Commission continues to maintain so-called intervention stocks, buying and selling butter and milk powder to influence prices. The Government will need to figure out what to do with 8,000 tons of milk powder accumulated under the scheme after Brexit.
Trade barriers could also be problematic. Gooderham says uncertainty over the future relationship has had some upside for dairy companies in recent months as retailers have shifted to buying from UK suppliers to safeguard against disruption in their supply chains should Britain leave without a deal.
“We’re starting to see more Ukproduced cheddar because there’s a demand for it,” he adds.
But Tompkins worries that if prices rise as a result of less overseas competition, the Government could decide to lower barriers to non-eu countries with lower standards.
“Some of these farms are able to use management practices that I can’t, and therefore can produce milk cheaper than I can.”
It seems clear that Britain’s dairy farms are in significantly better health today than during the painful dip three years ago. But whether it’s trendy almond milks or the intricacies of regulation, they still face a great deal of uncertainty.