4 April 2007

3 minute read

Europe

MDC senior economist Helen Eustace says the results show the number intending to leave the industry has risen to the highest level in three years, and more farmers are uncertain about whether to expand.

“Only a fifth of producers are now planning to increase production, compared with a quarter last year,” she explains. “Combine this with the 16% planning to exit dairying and we could to see a 7% fall in national production by the end of the 2008/9 quota year.”

Some 12% of those farmers producing over 1.5m litres of milk annually are planning to leave She says now is the time for milk buyers and retailers to be clear about their milk supply needs over the coming years. “If they are happy to lose a portion of domestic supply, then this isn’t an issue; but if they want to maintain current supply levels into the future, they must be clear about this now so farmers can have the confidence to reinvest.”

Miss Eustace says uncertainty and lack of confidence is a key theme in the survey responses. She estimates that ability and willingness to reinvest is one of the main stumbling blocks, with low morale being caused by falling profits from poorer milk prices and, particularly, higher input costs.

“Many farmers realise that major changes will be necessary for businesses to remain sustainable in the long term. While some may have the drive for change, it’s becoming hard to finance such plans with margins being continually squeezed.”

The survey suggests that more than three quarters of farmers intend to invest less than £25,000 in total over the next five years, and only 3% are planning to invest more than £100,000 – down from 9% last year. The majority of farmers intend their main investment to be just general maintenance.

“This really highlights the impact low margins are having. Normally, the most efficient farmers would be expanding to replace the production lost from those leaving, but even these are considering their future. Some 12% of those farmers producing over 1.5m litres of milk annually are planning to leave, compared with 6% last year; they know that if they can’t justify reinvestment, they’d be better using their assets in another enterprise.”

Miss Eustace says this is of particular concern when considering upcoming Nitrate Vulnerable Zone environmental regulations. “More than half the farmers surveyed stated they wouldn’t be able to meet associated costs, such as increased slurry storage, if the price tag was £20,000 or more; 40% said they wouldn’t be able to comply if it meant reducing stocking density by 30% or more – a possible implication for some,” she stresses.

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