Dairy farmers struggle as milk prices fall

Dairy Farmers of Britain (DFB) is the latest business to announce a reduction in the price it pays to farmers for milk, putting even more strain on an already fragile industry, warned the National Farmers’ Union (NFU).

Effective from February 5, a reduction of 1.1 pence per litre has been applied on DFB milk payments. The company said that pressure from lower consumer demand, continued poor returns from cream sales, weakening commodity markets, milk imports and aggressive competition in the market - were the main reasons for imposing the reduction.

“In November 2008, we announced a reduction in our member milk price, in part to reflect the reduced returns from cream sales,” said Andrew Cooksey, chief executive of DFB. “In the two months since that announcement, markets have weakened further and this price adjustment is a reaction to those market pressures.”

But DFB is not alone. Dairy Crest recently announced a 1.75p per litre cut for its February milk prices. And Robert Wiseman has also made a 2.2 pence per litre cut. Cream prices had fallen by the equivalent of 3.27p on every litre of milk bought since September 2007, said Robert Wiseman.

“With bulk cream to sell to weak commodity markets, it is clear that Wiseman is not immune,” said Colin Telfer, chairman of the Wiseman Milk Partnership. “But I am bitterly disappointed that the milk price is falling, because it sends the wrong signals, and undermines confidence and sustainability of the industry.”

At the beginning of 2009 Arla cut the price it paid to farmers by 2p per litre of milk and First Milk cut prices by 1.25p per litre. This follows an 18.6% drop in cream income between the third and fourth quarters of 2008.

“We are particularly concerned that these price cuts come at a time when UK milk production has reached a crucial tipping point and when the cost of producing milk remains painfully high,” said NFU dairy board chairman Gwyn Jones. “At a time when farmers are faced with low calf prices, a worsening TB situation and structurally high input costs, milk price decreases only serve to rock the foundation of an already fragile industry.”

The NFU’s latest figures show that milk production from April to December 2008 was 2.6% (242M litres) below the same period in 2007, and almost 5% below a three year average production.