Dairy production threatened by spiralling costs

The comments followed a report from the Agriculture and Horticulture Development Board (AHDB) on how growing price differentials impact on the milk-to-feed-price-ratio (MFPR) according to contract type.

The report found farmers supplying into fresh milk or manufacturing supply chains had been facing pressure on profit margins for an extended period.

“Historically, we’ve seen contraction in milk volumes when the MFPR drops below 1.15, suggesting there is risk of reduced production from this group of farmers should margins remain in the ‘contraction’ zone,”​ said the report.

NFU Scotland milk committee chair Gary Mitchell warned milk supply would suffer if this trend of cost to income was not rectified.

Inhibiting investment

“For too long dairy farmers in the UK have been asked to produce a quality product at an unsustainable price – one which inhibits on farm investment and a profitable return for the primary producer,”​ said Mitchell.

The whole supply chain from cow to consumer must recognise the severity of this situation.”

The current situation with milk prices is positive – most milk buyers have announced price increases over the next few months.

Farmers supplying Müller meeting the conditions for its Müller Advantage programme which aims to improve supply chain collaboration, herd health and reductions in environmental impact, received a price increase from 1 June. The dairy products processor raised prices by 0.75 pence per litre (ppl) to 29.00ppl.

Similarly, dairy cooperative First Milk raised its price by 0.5ppl to 29.93ppl, including the member premium, for a manufacturing standard litre from 1 June.

Source: foodmanufacture.co.uk