Threat of big fall in milk supply as cull quickens
Threat of big fall in milk supply as cull quickens
By Philip Clarke
A SHARP decline in milk supply is being predicted as the foot-and-mouth cull gathers pace, raising the pressure on milk buyers to lift prices significantly this April.
A survey of Federation of Milk Group and Dairy Industry Federation members last week suggested almost 100 dairy herds had already been taken out, equivalent to about 100m litres or three days supply.
But the situation is changing fast and, with all cattle on farms adjacent to units with confirmed foot-and-mouth cases also due to be slaughtered, that number is climbing.
As FW went to press on Wednesday, almost 150,000 head of cattle had been slaughtered – double the level of a week ago. Assuming 60% of these were milk animals (including calves and followers), this suggests 1.5% of the dairy herd has gone already.
Coming on top of the 4% drop in dairy cow numbers recorded in the recent December census, milk supply in the coming quota year is severely jeopardised, warns the NFU. "The market will have to deal with that," says economist, Alex Solomon.
Estimating the exact impact is impossible. That will depend on how the disease develops from here, though the omens are not good.
"The reduction in size of the UK dairy herd is beginning to assume serious proportions," says industry consultant, Mike Bessey. He also points to the number of missed inseminations, which will affect supplies later in the season.
But Mr Bessey expresses some sympathy for the dairies, which he says are "stuck between a rock and a hard place". Farmers need another 1.5p to 2p/litre just to break even. And, with many switching back to co-ops, they have more clout to achieve it.
But product prices are down on last year, especially skimmed milk powder, and any rise in producer prices will have to be financed either by a cut in processing margin or a rise in supermarket prices for liquid milk. "The latter seems to be the front runner," he says.
So far just a few buyers have declared their hands for April milk and intense negotiations are ongoing.
"The major processors are taking a hard line," says chairman of Scottish Milk, John Duncan. "They say there is no justification for anything more than a modest increment. But the market is going to be tight. We have already lost 2% of our herds in the core milk regions."
Axis says it is holding out for 2p/litre plus. "Commodity markets are not the only factor," says the firms Jonathan Horrell. "Last milk year we only hit quota in one month. Supply is now the greatest concern."
Zenith also hopes to announce a "significant" price rise in the next two weeks. It has lost 40 of its herds in Cumbria and another 250 are in restriction zones, though this has significant on-costs. *