Efficient dairy farmers will prosper in the coming years, despite the tough market conditions at present, according to a report from Kite Consulting.
'When the market turns' said profitability for ‘good dairy farmers’ would improve in the medium-term and there were “strong reasons to be more optimistic”. It acknowledged current market conditions had forced some to exit the industry, but it expected EU farmgate prices to show recovery within 12-18 months time.
The report was somewhat more positive than a recent DairyCo survey that predicted GB milk production would shrink further as farmer confidence slumped to a new low.
But the Kite report said that the UK dairy industry was ahead of Europe in terms of restructuring and there was an opportunity to stabilise milk production in the future provided farmers had the confidence to invest.
“The rewards for efficient, flexible businesses will increase whilst inefficient businesses will be exposed and more likely to exit the industry,” said one of the report authors Edward Lott.
“Although we are working with some businesses planning to exit the industry many of our clients are currently planning for the longer term with investment recognizing that we are in a volatile market and this is one of the dips.”
Report summary:
• World stocks levels will be a primary influence on world market prices. Tracking stock levels will be important as small changes will have a significant impact on price
• Better information is required
• Although we face a volatile future, profitability for good dairy farmers will improve in the medium-term compared to recent years
• The current market dynamics will widen profit differentials - the rewards for efficient, flexible businesses will be greater whilst inefficient businesses will be exposed and more likely to fail
• Trust and confidence throughout the supply chain is vital