Is the Dairy Industry Too Focused on Milk Prices?

OPINION - With the recent rumpus on milk prices, Charlotte Johnston, TheCattleSite editor looks at whether milk price is just an easy thing for the industry to hide behind when faced with other problems.

11 July 2012

2 minute read

Europe

Over the past six months dairy commodity markets have fallen. In the UK over the last two months, many producers have been faced with a near to four pence per litre drop in the price they are paid for their milk.

Whilst this drop in price will have an effect on even the more profitable farms, there appears to be little the industry can do against it.

With mergers taking place amongst dairy processors and the increasing strength of retailers in the supply chain the situation is likely to continue.

Already this week, emergency meetings have been held in Scotland with over 300 dairy producers attending. Even Scotland's Rural Affairs Secretary Richard Lochhead has got behind the Scottish National Farmers’ Union and said that if a voluntary agreement cannot be reached to tackle plummeting milk prices then the option of legislation should be explored.

Today (11 July) it is expected that over 2000 producers will gather outside Westminster to ensure that retailers, MPs, processors and the public are fully aware of the problems been faced. Local meetings are also being held across the country.

Whilst pressure does need to be put on retailers and processors to offer a fair price to producers, the milk price is not the be-all and end-all.

The key finding of a Dairy Co (industry levy board) report in January 2012 was that the key determinant of profit is total cost of production, not milk price.

Efficiency here is the key. There also seems to be concerns that only large scale dairy farms can be efficient and profitable.

However the same report showed just the opposite.

Some very small farms with below average yields are making good margins, and in some cases larger farms with high yielding herds were making a loss.

Whilst there is a place for demonstrations about milk prices, the industry should look at the bigger picture.

There are many ways on farm that producers can improve margins. Mastitis and lameness are two large concerns and areas in which, despite publicity in farming press, very little progress has been achieved.

Industry-led initiatives such as the Dairy Co Mastitis Control Plan should be encouraged, especially when mastitis costs the UK industry over £200 million a year.

Through improving efficiency on farm, margins on farm can be improved, allowing producers to rely less on milk prices.