Dairy Farmers Need 22ppl Yearly Average, Says Study
UK - Dairy farmers will find it hard to survive if the average price of milk stays below 22 pence per litre this year, according to a new study of the dairy sector
14 September 2007
2 minute read
Prices in the early part of the year were near 17ppl, so even accounting for recent price increases, the average price for this financial year will only just reach the 22ppl
Promar regional consultant Andrew Thompson.
The comprehensive analysis, carried out by Promar Farm Business Accounts (FBA), sampled 118 specialist dairy farms from around the country in an attempt to illustrate the challenges that face the industry.
It concluded the dairy industry needed a sustained milk price increase of at least 3.7ppl year-on-year to return the industry to its modest profits of two years ago, adding that this still would not be enough for any reinvestment.
Despite recent price increases, 22ppl would be hard to reach said Promar regional consultant Andrew Thompson.
“Prices in the early part of the year were near 17ppl, so even accounting for recent price increases, the average price for this financial year will only just reach the 22ppl required to achieve a realistic profit level,” he said.
With costs at the start of the year calculated at 21.3ppl and expenses continuing to spiral up, some experts suggested that 22ppl would still not be sufficient to support the industry.
Money for investment was already tight and the prospect of complying with Defra’s new environmental legislation and spending on general wear and tear would cause further strain.
Tom Hind, NFU chief dairy advisor, said: “If we assume that feed costs have pushed costs up by maybe 2ppl – and rising – add the prospect next year of implementing parts of the nitrates directive and include the general need to reinvest, and with the dairy market in its current state, then 22ppl seems on the low side.”
Dairy farmers have been buoyed by recent announcements that have pushed milk prices to a 10-year year high. If prices were sustained at or above 26ppl for the rest of the milk year then Promar’s benchmark 22ppl should be reached.
However, the mood in the industry is cautiously optimistic, as world demand continues to outstrip supply and prices have increased strongly after a ‘horrendous’ last year for the industry.
In the Promar sample, the milk price dropped by 0.7ppl, yield dropped by 1.3 per cent and production costs rose by 1.5ppl last year, prompting a £17,000 drop in profit to £14,673 for the average dairy farm.
Source: Farmers Guardian
