Dairy farmers' fate hangs in the balance, say experts

The dairy industry needs to prepare for a tougher trading environment in 2009, as consumers opt for cheap or imported alternatives and farmers are being driven out of production, experts warned.

Arla Foods was the latest casualty. The dairy company said that during the autumn: "It became clear that the financial crisis had developed into an economic crisis with consumers opting for cheaper dairy products and, in certain markets, avoiding buying them altogether."

The latter has had a strong impact on Arla's trading business, said the firm, as it downgraded its expectations for 2008 from profits of £114M to £76-88M.

Farm business consultants, Andersons, added that downward pressure on ex-farm prices would continue to increase into 2009, as cheaper imports were already available in cheese and other product sectors, that is "unless consumers insist on a UK product". But "this seems unlikely as the recession bites", said partner Tony Evans.

In addition, other factors would continue to drive producers out of milk production, such as age or retirement, regulations and a "lack of vision in all parts of the industry". Evans added: "The fate of the industry is therefore very much in the balance."

His warning came as the Ulster Farmers' Union (UFU) said that dairy farmers in Northern Ireland would lose £17M in January, partly due to "processors buying milk at bargain basement prices"

UFU Dairy chairman William Cromie commented: "No one can expect farmers to produce milk month after month while losing money on every litre that leaves the farm gate.

"There is now a genuine threat that dairy farms will not survive this economic loss. If the dairy sector starts to downsize, this will have a major negative effect on the wider economy."