7 January 2011

2 minute read

Europe

DCD has highlighted the rising costs of production which are showing no sign of slow down - wheat prices for instance reached the record high of £200/tonne before Christmas.

According to a report prepared by Kite in November, production costs have increased by between 1.5 and 2ppl over the 2010/11 winter period.

The Promar cost tracker compiled for Tesco put the total cost of production at 27.68p/litre and is going to be reviewed in mid-January.

This combined with static milk prices on the liquid non-aligned contracts is leading to reduced margins and 'many dairy farms now operating at a loss' according to DCD chairman David Herdman.

Mr Herdman said: "With costs of production in excess of 27p/litre and increasing, the ration between milk price and feed costs is at its lowest point since the summer of 2007.

"The need for a significant change in milk price is long overdue.

"The viability and sustainability of a large proportion of the British dairy supplky chain is now in jeopardy unless action is taken.

"It is self evident that many dairy farms are now operating at a loss."

Both DairyCo and DCD have stressed that commodity markets are buoyant and well above farmgate price which should enable the supply chain to return a higher price to farmers.

AMPE for example stood at 28.1p/litre in December and recorded a record annual average in 2010.

Mr Herdman added: "Milk prices on non-aligned liquid contracts are at unsustainable levels, at 24.6p/litre, and below the equivalent European, USA and even New Zealand prices.

"With Dairy Co reporting that 2010 saw record average results for its commodity market indicators, the fact that non-aligned UK dairy farmers continue to receive milk prices at a discount to these confirms that the UK dairy supply chain is failing to keep its key resource - its dairy farmers."

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