Dairy farmers’ losses have more than doubled to almost 3.5p for every litre of milk produced, according to the NFU and the Royal Association of British Dairy Farmers.

Figures contained in British Milk – What Price 2007, a new report issued by the two organisations, showed farmers’ average costs of production during the 2006/07 milk year had increased to 21.32/litre. The average milk price during the same period was only 17.9p/litre.

A similar report a year ago said farmers were losing just over 1.5p/litre.

Even though the industry had become more efficient, rising labour, utility and feed prices meant costs had increased by 16.43% since 2003, the report said.

Vicious circle

This increase did not include exceptional costs due to last year’s dry weather and did not allow for any reinvestment, said RABDF chairman Lyndon Edwards.

Milk producers were in a vicious circle because the lack of profitability meant it was impossible for them to overcome increasing costs by investing to improve productivity and efficiency, Mr Edwards said.

Danish farmers invested four times more in their business (€40/t milk produced)  than UK milk producers and even the average EU dairy farmer spent two and a half times more, he added.

Mr Edwards said recent milk price rises were welcome but did not go far enough, especially as costs were set to rise further this year.

“Farmers will also be faced with substantial additional regulatory costs, such as the impact of NVZ legislation. We believe that it is imperative that the supply chain acknowledges the significance of our findings and swiftly takes action to counteract the dire situation British dairy farmers are contending with,” he said.

‘Bleak future’

NFU dairy board chief Gwyn Jones added:  “This report highlights what we have known all along – that despite being among the most efficient milk producers in Europe our farmers are facing a bleak future. The gap between what they are paid for their milk compared with what it costs to produce is widening.

“If we fail to value our milk producers now we face losing them forever.”

Dairy UK, the body that represents the whole dairy chain, gave the report a lukewarm welcome. “The report highlights an increasing cost burden and it is the case that increasing costs are a factor throughout the supply chain,” said director general Jim Begg.

“It’s right to draw attention to the difficulties encountered by farmers but we must not lose sight of the potential future that is open to us. It’s in the market place that the industry will have to find its future,”

“There has been clear evidence recently that supermarkets – the biggest customers of the industry- and dairy companies are striving to give the best possible deal to farmers,” he said.