British dairy producers face mounting financial shortfalls as major buyers reduce farmgate milk prices due to weak global demand and stabilising supply. Processing companies are lowering payouts even though input costs for fuel and fertiliser remain elevated. The crisis is compounded by the fact that summer herd feeding kept milk volumes unexpectedly high during drought conditions. Many farmers are trapped in these disadvantageous arrangements because their contracts offer limited leeway to switch to different buyers.
Key points
Most British liquid milk producers are operating at an ongoing financial loss due to high…: Most British liquid milk producers are operating at an ongoing financial loss due to high overheads.
Unexpectedly robust summer production and stabilising global milk supplies are putting do…: Unexpectedly robust summer production and stabilising global milk supplies are putting downward pressure on farmgate values.
Production-cost pricing models from retailers like Tesco and Sainsbury’s are not universa…: Production-cost pricing models from retailers like Tesco and Sainsbury’s are not universally accessible to all dairy farmers.
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“Milk is leaving the farm at a loss,” says dairy farmer Ian Harvey, as he warns confidence in the sector is “at rock bottom”.
Most of the UK’s dairy producers were already being paid less for their milk than it costs to produce it after a year of volatile farmgate milk prices, combined with the impact of the summer’s drought and soaring costs of vital fuel and fertiliser triggered by the conflict in Iran.
However, the industry has been shaken further by the decision by two large milk processors in recent days to cut the price they pay farmers for their liquid milk.
Freshways, a big processor that supplies bottles of milk to corner shops, cafes, hotels and wholesalers, announced it was slashing the price it pays for milk by 7p a litre from 1 December, reducing it to 29.4p a litre.
The company blamed weaker dairy markets and said poor returns for liquid milk were squeezing processors.
The cut almost wipes out the combined 9p a litre price increases Freshways introduced over the past two months to support farmers…
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