16 January 1998

Dairy units expected to expand as 10,000 quit

DEDICATED dairy farmers will have plenty of expansion opportunities between now and 2005 because 10,000 will retire or quit in that time, says Andrew Dare, chairman of Milk Marques commercial wing.

Speaking at the Semex conference in Glasgow on Monday, he said: "There will be opportunities to buy land and quota as prices fall to reflect the greater supply and lower milk returns."

In addition to a third of producers leaving dairying, he also forecast a 45% increase in production from each farm to well over 500,000 litres. Average yields would rise to 6200 litres a cow and herd size to around 90 head.

But if those who remained in dairying wanted a secure future, they had to be prepared to invest in their own processing plants. "The large public companies which dominate the UK dairy industry no longer feel they have a responsibility to take all your milk, and Milk Marque has had to resort to spot markets and contract processing to ensure all milk is sold," said Mr Dare.

"In the absence of sufficient investment by existing companies, farmers will have to invest themselves and it will have to be done by sizable co-operatives capable of raising £25m to build a plant."

There were currently about 60 different producer co-ops and groups, but with little bargaining power they would have to group together into three or four much bigger co-ops to be effective.

Mr Dare thought there could be joint ventures when it came to processing plants and suggested that Milk Marque and Scottish Milk could share facilities somewhere near the border. The need was becoming greater with a 7% drop in liquid milk consumption since deregulation.

He also cautioned farmers against breeding and feeding to change milk fat and protein levels. "I can see the benefit in theory of producing milk of the compositional quality required by the buyer but I do not think the cost is justified except in a few special cases."

The market was fickle, buyers changed and so did product mix. Butterfat was currently worth more than skim in the world market because of Russian demand – but that might not last. Mr Dare said that the premium for changing fat or protein levels was bound to be small because the cost of separating milk at a reasonable sized factory was just 0.1p/litre.