Dairy struggles with high costs

Rising costs are hitting dairy farmers’ incomes despite high milk prices, according to the UFU. Farmers want all processors to ensure a better return.

The Ulster Farmers’ Union (UFU) has called on milk processors to ensure a better return for farmers as costs rise. In an open letter to the press, UFU Dairy Committee Chairman Andrew Addison commented that the milk price “is too high to be competitive yet too low to cover costs.”

Farmers, he explained, received a poor price for milk last spring. They then had to house cows on several occasions over the summer due to the poor weather; valuable fodder was being eaten away and not replenished.

A brief upturn in prices took place in the early autumn but cash flows then “came under severe strain” with many farmers “struggling to pay off capital invested and also pay for the ever-rising feed bills.”

World demand for milk started to pick up and global dairy prices generally recovered, back to the same levels experienced in January 2012.

“With the buoyant spot price and recovering global demand, the local price recovered as forecast,” Addison remarked. “In terms of the current milk price, industry sources have drawn favourable comparison with [Republic of Ireland] and EU prices. Yet, it should be stressed that you are not comparing like for like.”

EU member states have differing product mixes and destinations. Evidence from the market indicates that demand is “relatively stable” but production fell for five consecutive months between July and November inclusive.

“The level of strain on local cash flows is demonstrated by the number of cows being culled in Northern Ireland, in many instances to pay bills,” Addison added. Figures published in November indicated that numbers culled had reached levels not since the BSE crisis in 1996.

“Such stock depletion, along with poor quality fodder and higher bought-in feed prices, means that any significant recovery in supply is unlikely in the short term, even as we approach the spring flush,” he said.

Most farmers have now received their 2012 single farm payment but for many dairy producers, this will only be a “brief respite” which allows them to pay some outstanding bills.

“In trying times such these, there is an urgent requirement for dairy processors to deliver a sustainable milk price to their producers,” he proposed. While processors said that they could only deliver what the market returns, the demand and supply scenario indicated that prices (and therefore incomes) were going up.

In Great Britain, Dairy Crest Direct has declared an objective of paying at least 32 pence per litre across contracts. In Northern Ireland, the average milk auction price in December was 29.5 pence per litre.

“In light of the gap between local farm gate milk price and commodity returns as well, as the continued lack of available supply (locally and further afield), future prices increases are justified,” Addison said in conclusion. “The time is right for all processors to step up to the mark and provide a sustainable return to their producers.”

The 2012 Census of Agriculture found that Northern Ireland had 285,369 dairy cows and 2,662 dairy farms.

Northern Ireland dairy production

Source: UFU