Semex conference: Managing price volatility key to dairy future

Managing volatility in milk markets will be the key to dairy farmer survival over the next decade, delegates heard at Semex‘s Dairy Conference in Glasgow this week.

Milk could potentially become more volatile than any other soft commodity, warned John Allend of dairy consultant Kite.

Dairy farmers could expect to see troughs and peaks in milk prices about every three years, with small changes in commodity stock levels having a huge influence on price, he said. “Milk prices are dictated by supply and demand with a removal of 0.3% of stock potentially resulting in a doubling of milk price.”

But, although he predicted milk markets will stabilise in the short to medium term as stocks dwindle, he emphasised the importance of managing volatility. “There are concerns over parts of the EU because some states are not in good shape to manage volatility. But in the UK, we fare better than many other countries, with prospects likely to be good for any competitive farmer.”

He said retailer initiatives, milk contracts and efficiencies at farm level would be key areas farmers could look at in order to manage volatility.

The NFU‘s chief dairy adviser, Hayley Campbell-Gibbons, agreed. “Contracts offer producers a real opportunity to hedge at least a proportion of production and this is one of the reasons the EU Commission has identified contracts as a fundamental factor in insuring fairness,” she said.