10 April 1998

Forecast suggests 20% dairy farmers will leave by 2000

By Robert Harris

UP TO 20% of dairy farmers will leave the industry in the next two years.

Many farmers would be better off retiring now, according to accountants Deloitte & Touche.

The strength of the £, aggressive loss-leader tactics by the supermarkets in fresh milk sales and processor amalgamations have driven milk prices down, says the companys Mark Hill.

Typical farm gate price is now 15p/litre, 4p less than the cost of production before rent, finance and leasing costs, he reckons.

"The average age of dairy farmers is 57. It is decision time. Many farmers have no one to succeed them, and the business becomes unviable if they hire labour."

Farmers face a "triple whammy" in the next 12 months, says Mr Hill. No sign of better prices on the horizon means losses will continue.

That will push quota values down to about 30p, eroding farmers retirement fund. And capital gains tax reform means a farmer with 600,000 litres of quota worth £250,000 will, after Apr 1999, have to pay £17,000 in tax compared with nothing now. "The clock is ticking. Delay and indecision will cost money."

Government proposals which could affect many more producers were slammed at a recent Agra Europe Dairy Industry conference in London as a charter for agricultural industrialisation.

Quota broker Ian Potter said the proposals to bring the milk price down to world levels and phase out quotas to boost exports of milk products were "sheer stupidity".

Dairy farmers had already seen profits crash by £700m in the past six months, yet the cut was double the 15% contained in the Agenda 2000 proposals and would pull prices down to about 13p/litre.

"Why participate if we cant make money? Has the government decided there are too many farmers and it is time for an accelerated cull?"

Rather than producing more, cheaper milk for exports, farmers should concentrate on producing less milk for better-paying domestic markets. They should secure market share by reducing the number of co-ops from the current 45 to a 10th of that number, Mr Potter maintained.