Dairy farmers weather the market storms

Dairy farmers need thick skins after the barrage of heavy milk price cuts since the spring, writes Charlie Taverner.

Bumper production across the world has sent commodity prices tumbling and in our increasingly global market the pressure has been felt at the farmgate.

Returns from the Global Dairy Trade auction have plunged more than 34% in six months.

The UK average milk price fell 2p/litre from its February peak to hit 31.98p/litre in June.

Updated figures for July, August and September will make even tougher reading, after the more recent cuts from all the leading processors are taken into account.

Sadly, the signs of let-up are few.

On the production side, the UK is running about 8% up on the year, Ireland was 10% higher between April and June and similar stories are emerging from northern Europe and the southern hemisphere.

Further ahead, Goldman Sachs predicts a five-year global milk glut – boosted by the end of European quotas in 2015 – that will only add to the volatility.

In the short term at least, farmers will have to cope with a few pence less for every litre of milk.

Producers can do nothing about powerful market forces, but they can shore up things closer to home.

On the accounting side, that might mean budgeting for more volatile conditions and ensuring you have the cashflow to manage.

For those looking to expand or who are strengthening their core business, profitability has to remain the focus.

And, as always, technical efficiency has to be a top priority.

A tightly managed, efficient business is one that can weather the market storms – however long they last.

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