DAIRY FARMERS need to be paid at least 19p/litre for their milk to have the confidence to invest and expand production, says The Dairy Group.
“While milk prices remain below 19p/litre for the majority of dairy farmers, production will remain well below quota,” it says in its latest report.
Over the past few months costs have been rising (energy and labour) while increased market returns have failed to materialise at the farm-gate.
“Businesses are facing extreme financial pressure. If milk prices do not at least reflect rising production costs then production will decline.”
The UK is running 198m litres below profile already this quota year, the report adds.
“ The pattern appears to be well set with successive months showing no sign of recovery to make reaching quota in 2005/6 a distant prospect, indicated by a collapse in quota values.
“The only issue which remains is whether the milk buyer will require quota to cover all milk sales, as this will be the only factor which will create any demand for quota.
“The early indications from milk buyers are they will not, which is good news for dairy farmers, where even 0.8p/litre spent on quota leasing is money they can ill afford to spend.”
UK quota is set to increase by 1.5% over the next 3 years to 14.27bn litres.
The prospects of the UK exceeding quota even further ahead look unlikely without a radical change in the profitability of milk production, the report says.