Milk contracts provoke quit threat

NEW MARKETING arrangements for farm milk must be found quickly to prevent even efficient dairy producers from quitting the industry.

A survey of 460 dairy farmers by dairy specialist Kite Consulting showed that almost four out of 10 said they would give up their herds if the milk price dropped to 15p/litre.

Few of those remaining would be willing to take up the slack and milk output would fall by more than a quarter.

Even at 17p/litre, nearly one-fifth of clients said they would sell their cows. Although more staying in would expand, milk volume would still fall by 5%.

But at 19p/litre, just 3% said they would quit while many others would expand, resulting in a 15% increase in milk production.

These producers represent the top end of the industry and if prices did fall the impact was likely to be a lot worse when the whole sector was taken into account, said Kite‘s John Allen.

He believed the impact could be felt as soon as next spring as pressure on milk price increased.

Milk needed to be produced on contracts that provided a margin, said Mr Allen.

These would bring more stability into the market, encourage long-term investment and develop more trust in the supply chain, he added.

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