It was not particularly difficult 12 months ago to imagine milk prices hitting the buffers because it had been clear since last summer things were going downhill at an increasing speed.
Buyers began altering their contract terms mid summer and everything one read or was told of the proposed new terms smacked of foreboding.
In our case the buyer’s managing director told me they “had lost more than £1 million” last year and were going to impose A and B type milk prices on their farmers, regardless of any joint agreement. At the time I told him we could not accept the terms he demanded as they were, frankly, unfair and unreasonable.
Obviously many farmers felt likewise. In our case the decision was made for us when the dairy arbitrarily deducted large penalties from our February milk cheque. Very marginal failures relating to “water in milk” – a regular issue with robots during low production periods – invoked penalties which bore no relation to the then current contract terms. Instead, we were penalised at rates which were not even due to come into effect until 1 April, still two months away!
Ironically the milk remained totally marketable for the dairy. Another day that same week there was a miniscule antibiotic failure which lead to the loss of two days’ milk income. The dairy rep had much pleasure in telling us they didn’t need to dump the milk and could use it – but they wouldn’t pay for it.
Lawyers became involved and it quickly transpired we were not the only producer affected. We were told a number of the farmers being penalised had also handed in their notice. Strange or what? Only 18 months earlier the dairy were signing up a significant number of new farms, so doubtless there were some pretty unhappy farmers when contract terms changed soon after. Fortunately about that time we had been approached by another buyer so we negotiated an early exit period.
The whole situation is, in today’s jargon, a perfect storm. Milk quotas have been removed across Europe; Russian and Chinese buyers have pulled the plug for various known reasons; and overproduction worldwide was brought on by the ill conceived prospect of unlimited markets for unlimited litres, flooding what markets there were. This was not helped by UK supermarkets again reverting to their traditional habit of pricing milk as a loss leader, appearing to have no hesitation in devaluing it in the eyes of the British public. When bottled water sells for significantly more than a life sustaining feed such as milk, prospects dim.
I suggested some months back that instead of pushing up production, the most sensible solution for all dairy farmers was to cut their feed, short term, to help create a shortage. I remain convinced that is the best way if farmers really want to stay in business and keep their cows long term. Because the fact is, and it has to be drummed home, most producers’ annual production costs – as this is written mid August – are around 30 pence per litre (ppl), while most are getting paid around 22 ppl. This 30ppl also includes provision for reinvestment in the business. Many producers are getting closer to 17ppl, and a few much less still. Yet a small number of favoured producers are getting a price to cover their costs, simply to help some of the supermarkets push the lie they are paying their farmers fair and sustainable prices. So they might be to that small handful of farmers. But most of the milk is being stolen from the rest of UK dairy farmers at low prices simply because they do not share the favourable terms of those lucky few.
A scheme recently catching my eye was the idea of marketing milk from herds which spend at least six months of the year outside at grass. A brilliant idea: to reward farmers who farm in a sustainable and, dare one say, traditional manner. Named the Free Range Dairy Network, it appears to plan on positioning its milk price somewhere between regular and organic milk. Presently the scheme is developing in the north of England and Devon and one hopes it picks up speed, as it could just be the salvation of many good traditionally run units – although the scheme’s early publicity is not, from my experience, that encouraging.
Another snippet is the news that protests by French farmers against milk price cuts – accompanied by the usual dung spreading and tyre burning, so enthusiastically encouraged by their gendarmerie – have just been rewarded by the French government with another 420 million euros. Any UK producers anticipating similar handouts need to remember what European laws say about a level playing field across the European Union! It could only happen in France with their archaic property laws which require the sharing equally among the childen.
This ensures huge numbers of French citizens still maintain a financial interest in the wellbeing of French farming. Their police force ardently supports this and, with their government, allow their lucky farmers to get away with almost anything. Fancy a move to France?
Enough of milk so let’s move on to something equally exciting: grain. After a short spurt, prices have retreated again as harvest reaches its final stages. Harvest itself is always quite exciting as one anticipates and then sees the result of the last season’s work, although it’s just rather depressing to see its worth being so low. Maybe there will be a sudden change in the international picture but that seems pretty unlikely just now. So we will keep the malting barley stored away for a few months, hoping things perk up. One can but dream!
