Dairy farmers braced for a volatile year ahead

Dairy Farm

Lancashire’s dairy farmers face more volatility in the milk market with prices they receive set to fall, an industry expert has warned.

The number of dairy farmers in the county has fallen from 663 a decade ago to 498, according to the latest NFU figures.

And NFU’s Lancashire county adviser Adam Briggs told Lancashire Business View: “We are now in a situation where many of the county’s dairy farms are exposed to the volatility of the commodity market.

“This open market deals in skimmed milk powder, commodity butter, bulk cheese and liquid milk with the buyers being anyone who wishes to purchase the product at the best price possible.

“For many years volatility in this market could be managed to a degree using methods such as intervention purchasing to prevent excess product from pulling the price down or quotas of supply. However, these cannot be used anymore.

“Some farmers on dedicated supermarket contracts may still be protected from the vagaries of the marketplace and will have guaranteed prices written into contracts.”

He added: “Over the past 12 months dairy farmers in the county have enjoyed a period of sustained price improvement but we are now in a situation where the market is heading the other way with price decreases becoming ever more likely.

“This cannot be attributed to Brexit. It’s simply a result of the supply and demand dynamic of the sector. Farmers in the UK and Europe have responded to the increases in price and produced more milk to capitalise.

“When milk prices are low farmers tend to cut back which results in a short fall of supply. Inevitably, prices then rise as buyers secure their supply and farmers respond to those price rises by producing more milk which eventually results in oversupply again.

“Of course this has always happened but the big change recently has been farmers’ level of exposure to this price volatility.”

  • For more insight into the county’s food and drink sector see the January/February issue of Lancashire Business View.

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