Survey data highlight plight of dairy industry
A NEW SURVEY showing the plight of dairy farmers could be used to put pressure on manufacturers, processors and food retailers to halt the slide in farm-gate milk prices.
The HSBC/ADAS Spotlight survey covered the 12 months to June 2004 and showed that more than half of specialist dairy farmers failed to make a profit despite cutting their production costs.
“Individual producers are under pressure, and we”d hope that milk buyers will take that on board,” said John Barker at HSBC Agriculture. The bank has promised to share the data with manufacturers, processors, food retailers and food service companies to highlight the problem.
Tom Hind, dairy adviser at the NFU, said it was “absolutely vital” to share this information with the rest of the dairy supply chain because farms” input costs had risen. The belief that farmers could absorb high costs infinitely had to be challenged, he said.
The 97 specialist milk producers surveyed had an average production cost of 20.2p/litre, down 0.5p on the year before. But the gap between the most and the least efficient farms widened, with the top 25% of those polled producing milk at 18.1p/litre, while the bottom quarter averaged 22.8p/litre. (The benchmark for milk producers aiming for the top 25% is 18.5p/litre, as shown in the table.) As a result, the most efficient producers made a 3.1p/litre surplus, compared with a 2.4p/litre loss for the least efficient, including by-product income from calves and slaughter premiums. The average farm kept a modest surplus of 0.5p/litre. But less than half of the farms surveyed made enough to cover the cost of borrowing and reinvestment, pushing average losses to £7900 or 0.7p/litre.
Across the survey group, average herd sizes were up two animals to 166, while milk production rose by 54,000 litres, or 213 litres a cow, suggesting that for dairy specialists, investment is seen as the way forward. Borrowing increased markedly among farmers as they sought to maximise single farm payment rights by buying extra quota.