Milk price crisis leads to losses for 25% of Welsh farms

Dairy farmers saw the biggest drop in farm business income during 2015/16, with plummeting farmgate prices pushing a quarter of milk producers into a loss-making situation, according to statistics released by the Welsh government.

Farm business income figures show that the average business income for all farm types in Wales was down 23% to £22,200, because of falls in commodity prices and a drop in the value of the basic payment.

However, average dairy incomes fell by more than half to £32,800 from £70,500 in 2014/15.

See also: Welsh farm income figures show reliance on BPS

This was almost entirely driven by the 25% fall in milk price, which was only partially offset by a farmers producing a higher volume of milk and lower feed costs.

“This is a greater price fall than the 21% fall seen across the UK for the same period (based on national milk price statistics),” said the report.

“In the last five years, the average milk price paid to farmers in Wales was generally 1-2p/litre lower than for the UK as a whole.”

Beef and sheep

Average farm business income on lowland cattle and sheep farms fell by 40% to £16,300 per farm.

This is the lowest figure for this farm type since 2005/06.

However, average farm business income on upland cattle and sheep farms was more consistent, falling by only 1% to £21,900 per farm.

Around half of the fall was due to lower output from the sheep and wool enterprise.

This was driven by lower fat lamb, store and ewe prices in 2015/16, off the back of plentiful domestic supplies of sheep meat while demand remained relatively stable.

The average basic payment was also 12% lower than the single payment of the previous year.

However, lower farm business output was almost entirely offset by lower variable and fixed costs.

Wide variability

There has been a great deal of variation around the average farm business income for all farm types in each of the past four years, according to the document.

The percentage of farms making a loss has gradually risen each year – to 22% in 2015/16.

However, 7% of farms had a farm business income greater than £75,000.

By farm type, 25% of dairy farms made a loss in 2015/16, compared with 20% of hill farms and 17% of lowland cattle and sheep farms.

The figure for dairy farms was significantly higher than in the previous year; in 2014/15, only 10% of dairy farms made a loss.

However, in 2015/16, around 19% of dairy farms had a farm business income of more than £75,000.

Futures contracts: farmer views wanted

Do you use futures and options markets to help you manage risk? Or are you interested to learn more? Farmers Weekly is keen to find out the extent to which UK farmers use these markets. Complete our survey here.

Take the survey

Futures markets and commodity risk management online course:

  • Risk management strategies for a more predictable financial performance
  • Educated conversations when collaborating with your advisors
  • Negotiate better prices with your grain merchants

View course