Dairy resilience and EU trade debated at FW Question Time

Voices from across dairy sector discussed a number of challenges producers are facing in an increasingly volatile marketplace, at the Farmers Weekly Question Time event at Dairy-Tech in Warwickshire on 4 February.

The panel discussion focused on improving business resilience to combat price shocks, dealing with labour shortages, dairy contracts and a potential Sanitary and Phytosanitary (SPS) agreement with the EU.

NFU Dairy Board chairman Paul Tompkins determined that resilience would be key for dairy enterprises in 2026, with the industry in a fragile state.

See also: MPs wary of SPS fallout as EU talks resume

He said: “Geopolitics, policy shifts, changing weather patterns, everything that is happening around us, we need to ensure the dairy farms become more resilient at these ever growing challenges to our farm.”

Mr Tompkins added that, behind all the spreadsheets and bar charts, were real family farms that were feeling the pain of a low farmgate milk price.

“Whilst the processors might also be feeling the pinch, it’s dairy farmers that are looking at how they’re going to pay the mortgage or the rent going forward,” he said.

Rob Hitch, partner at Dodd & Co Accountants, added that most producers were either below or at cost of production, and their main objective in the short term would be managing cashflow.

“It’s probably going to be in the next three or four months that prices really start to bite, particularly as seasonality pricing comes in.”

He called on banks to offer more leniency to farm businesses given how volatile the marketplace was.

Becki Reay, head of UK corporate at Kite Consulting, had observed a range of performance between dairy farms, in terms of productivity and technical excellence.

Ms Reay said there were strategies that businesses could adopt to help deal with volatility, ensuring that market signals were spotted early so that farms could respond and take action.

The AHDB has been tailoring its advice as much as possible to individual groups so that it can help them overcome some of these challenges, according to AHDB dairy sector director Paul Flanagan

Mr Flanagan added that an additional £2.5m a year in levy income for AHDB Dairy has given the organisation more budget to spend on marketing dairy products to 18- to 22- year-olds, its Let’s Eat Balanced campaign, and developing new export markets.

Fairer contracts

Falling farmgate milk prices had also increased the focus on Fair Dealings Obligations (Milk) Regulations (FDOM), which came into force on all contracts last year.

“We’ve not yet seen how FDOM and the new contracts will come into play this spring, but we’ve at least got a very transparent outline of the contracts and what that looks like on an individual buyer basis,” Ms Reay added.

Mr Tomkins reiterated that every contract must have a milk pricing schedule so that every dairy farmer will understand how their milk price is generated.

“That milk pricing schedule must be followed during upturns and downturns, and there have been examples over the last six months where that has not always been the case.

“It is really important farmers, when they have a milk price change, either up or down, have a look at how their milk price is generated in their milk contract and ensure that it’s compatible.”

Securing good labour

Dairy Farmer Peter Alvis had noticed in his own farming business that finding the right people, looking after them, training and investing in people was key.

“Treating them in the manner that they want to be there,” he said.

“The technology, the kit they work with, all of those sorts of things are critical about making it right.”

Mr Alvis said staff do not want to be working 60 to 80 hours a week anymore, and businesses needed to be aware of this and offer a better work-life balance in order to secure the best talent.

He also warned that tougher environmental permitting may be coming down the line for the sector.

“We’ve got so many different farming types that permitting in that format doesn’t really fit particularly well within our industry,” he said.

“We need to have something from a permitting perspective that’s a bit more nuanced, that can understand the requirements of a hill farmer up in Derbyshire or grass-based system down in Devon, so that they can actually be suitably adapted.”

SPS agreement

The UK is currently seeking negotiations with the EU to allow the UK to export certain products to the EU market with less paperwork and red tape.

Mr Tomkins acknowledged that a future SPS agreement with the EU would, in theory, be good for the sector by reducing the cost of exporting, but he outlined several concerns.

He suggested that any cost saved as a result of reducing the burden of red tape would not necessarily be shared with dairy farmers, and would likely be absorbed in the supply chain.

Mr Tomkins said: “In return for this agreement with the European Union, dairy farmers will be asked in future to follow rules which are set inside the EU such as the ruling on animal health and welfare.

“This might not be an immediate issue but I can see a time in four or five years’ time where new rulings are set inside the EU, where the UK does not have a vote.

“The UK may be obliged to follow the production and farm standards shared by European colleagues.

“Yet on the other hand we have had secretaries of state go to other countries around the world and sign trade agreements allowing dairy products to come into the UK that are not to those same standards.”

Mr Alvis added that the industry shouldn’t give away anything in getting alignment because exporters can actually make it work already.