Dairy farmers are under pressure; they are being paid up to 50% less for their milk than 12 months ago.
Why? There is no single reason; price pressure is down to a mix of complex market issues impacting on every link in the dairy chain.
1, Global milk production is up, for example New Zealand production increased by more than 15% on the year, and European by over 5%. Farmers in the main dairy producing countries have been incentivised to produce more milk for a number of reasons – from meeting China’s growing demand, to preparing for an end to European milk quotas in March 2015, whilst in the UK farmers enjoyed an exceptionally good growing season. Added together and supply has grossly outstripped demand.
2, Global commodity prices - increased production has put price pressure on dairy commodities. By the end of 2014, the sector’s barometer, the Global Dairy Trade auction fell by almost 50%, from an all-time high in February 2014 to the lowest in five years.
3, UK commodity prices reflect global ones and since home production has also risen by 10% on the year, more UK cheese, cream and butter has been produced.
4, The Russian ban - the EU exported 23% of its dairy products worth £1.8bn, until trading was forced to cease in August.
5, UK farmgate price - the above trends have impacted on the price paid to dairy farmers which has been on a downward spiral our dairy farmers for the last 14 months. There is no apparent let up in the trend for the first nine months of this year.