So you want to…Process your own milk?
To many dairy farmers, on-farm processing evokes images of industrial-scale cheese making and expensive facilities.
But it doesn’t have to be like that. There is a new breed of farmer-processor delivering milk direct to the consumer. And with almost 830 direct sellers in the UK, there is an increasing wealth of experience to draw on.
Do I need to do some research?
Of course. Look at the competition in your area, and don’t try to win business by undercutting other farm processors’ prices, says Susi Batstone. She and her husband, Chris, moved into on-farm processing in 2002 and now run courses on it.
“Ask potential customers if they’ll buy off you, but don’t believe everything they say.” If you are looking to supply a high-value market further afield, you must ensure that your product quality is excellent.
The best form of marketing is to offer people a free tasting, she points out. “And keep doing it. If you have excess stock take it to potential new customers and give it to them for free.”
If you are selling through retailers, make sure you have a recognisable brand and get leaflets, stickers, posters or cards to display at the point of sale or till.
Do I need to be registered?
All food businesses need to be registered with their local authority and inspected and licensed by the Environmental Health department.
The latter will advise you on building layout, equipment and training requirements and in addition will issue you with a food mark to be displayed on all your packaging.
Trading standards must also approve labels and anyone selling through a retailer may need to register a barcode.
Who else should I talk to?
At least one person must have a basic food hygiene certificate, and you will need to draw up Hazard Analysis Critical Control Points (HACCP) procedures for the processing facility.
Larger-scale operations may need to apply for planning permission, and if you buy in and process other farmers’ milk you may have to pay business rates.
What equipment do I need?
Small operations require very little investment. With second-hand machinery you can get up and running for about £10,000. But plan your dairy layout first, allow for expansion and consider the working environment.
For example, housing any compressors in the dairy makes it a very hot place to work and means harder work for the chillers.
You will need washable walls, ceilings, floors and surfaces, a basin for hand washing and a changing area for staff. Protective clothing is also a must, as are buckets and washing-down facilities.
The buildings will need a good electricity supply, as well as a generator back up, water, and a cold storage area.
For the actual processing you will need a pasteuriser (£12,000-£14,000 new or £5000 second-hand) and a separator to make full-fat, skimmed and semi-skimmed milk (£3500).
And while a bottler is not essential for very small operations, a manual bottling machine costs about £3000 and will manage up to 1500 litres a day.
For larger-scale facilities, a rotary bottler and capper will cost about £26,000 including installation, and a bottle debagger and labeller will set you back between £15,000 and £20,000.
A cold store can be bought second hand from specialist refrigeration firms for about £3500. Plastic 1-litre bottles or pots cost 8-10p each from wholesalers, including lid and label.
What if I don’t want to process it myself?
Local processors may be able to contract process your milk, leaving you to concentrate on the marketing. The downsides are higher transport costs and less flexibility in milk balancing – but it avoids the capital outlay and extra work of doing it all yourself.
Are there any restrictions on milk fat contents?
Whole milk must be at least 3.6% fat, semi-skimmed should be between 1.6% and 1.8% fat and skimmed below 0.1%. You can buy a butterfat meter to measure these levels (£3000 new or £1500 second-hand).
Semi-skimmed milk is usually made by adding skimmed milk to whole milk until the required fat content is reached. You will have to balance your butterfat, both through your cattle ration and finding alternative uses for the surplus cream.
“The biggest seller is semi-skimmed, at about 60% of sales,” says Mrs Batstone. “Then about 35% is whole milk and 5% is skimmed.” The excess cream can either be sold to a local processor for about 50p/kg, sold to a nearby dairy, or made into cream, clotted cream, butter, yogurt or cheese on farm.
Will I need to buy my own vans?
If you plan to distribute your milk, you can either rent chiller vans, buy them outright or on hire-purchase. Short-term hire costs about £100 a day.
Hire-purchase vehicles cost about £100 a week over a three-year period, plus running and maintenance costs. You will also need to buy milk crates (£2.30 each).
Draw up accurate delivery schedules and stick to them, says Mrs Batstone. “Everyone wants milk at 7.30 on a Monday morning, but you just can’t do it.
“Liaise with your customers, don’t let them bully your van drivers and definitely don’t give out the drivers’ mobile numbers.”
Do I need to change my milk quota?
You must buy at least one litre of direct sales quota, and then you can freely transfer your wholesale quota to direct sales to balance your requirement each year.
Also, speak to your milk buyer to ensure that they are happy to take a reduced (and variable) volume of milk each week. You need to keep records of every litre of milk processed and sold for quota purposes.
If you expand the business to the point that you need to buy milk in, then you have to apply to the Rural Payments Agency for approval as a milk purchaser.
What sort of returns can I expect?
You can expect to sell organic milk for about 72p/litre, although wholesale prices for retail will be about 60-65p/litre. Organic single cream sells direct at about £3.25/litre, double cream at almost £5/litre and clotted cream at about £5.75/litre.
Organic prices are about 30% higher than conventional. By year three you can expect to be making a margin of between 10p and 16p/litre for either conventional or organic produce.
Can I get a grant?
Existing DEFRA processing and marketing grant schemes have ended and new ones won’t be in place until 2007. But there may be local schemes offering funding for marketing or capital investment, so contact your local Business Link or regional development agency.
Case study
Ivy House Farm
beckington, somerset
“We could see the price of milk was going to fall and knew we could not survive if it did,” says Mr Bowles.
Initially, they spent about £5000 converting some calf pens into a small creamery, where they produced clotted and double cream. They ran two herds – the original Holstein Friesians and a smaller herd of Jerseys.
In 1999, the Bowles’s milk buyer closed, so they went organic and processed all of their own milk. A year later they moved to an all-Jersey herd and now produce 450,000 litres of milk a year from 120 cows, all of which is sold direct to the consumer.
“There were no blueprints for on-farm processing at the time. We started off with cream and it is still our core product,” says Mr Bowles.
But the couple now process 1500 litres of their own milk a day, with a further 300 litres bought in from neighbouring farms. They employ two full-time and 10 part-time staff.
About 65% of the milk is sold as semi-skimmed, with a quarter going as whole milk and 10% as skimmed. With a rolling average butterfat of 5.25%, there is plenty of cream available, and in the winter months some is made into butter to make up for the drop in demand.
About a third of the Bowles’s products are sold to London buyers, ranging from small delis to Harrods. “We did some farmers’ markets in London in 1998 for six months. It was a nightmare, but we’re very pleased we did.”
The rest is sold through local shops, garages, restaurants and other businesses, as well as via two independent milk rounds in the local area.
“We try to stay within 10 miles as transport is so expensive. We deliver six days a week and bought a brand new lorry last year, which has already done 55,000 miles.”
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