With the average farm gate price for milk in the UK at 24.96 pence per litre in March (source: DairyCo), some 25% lower than March 2014, it’s easy to see why there is so much pain and suffering in the dairy industry right now. But, as producers desperately seek some sort of foothold for the future, the degree of pain and suffering ranges enormously, even between neighbouring farms.
The capacity of one producer to survive, whilst just over the hedge cows are being loaded onto a truck, is very often down to a difference in costs of production – survival of the fittest. However, since dairy industry deregulation and abolition of the Milk Marketing Board (MMB) in 1994 the milk production game has been played on a field that is far more ridge and furrow than level. For instance, producers fortunate enough to be on ‘aligned contracts’, supplying liquid milk to major retailers like Tesco, Sainsbury’s, Waitrose and Marks & Spencer are still receiving in excess of 30 pence per litre today, around 80% more than those at the opposite end of the spectrum who are now paid as little as 17 pence per litre.
Increasingly dairy farmers find themselves in one of two camps – the ‘Haves’ and the ‘Have-nots’, with a large majority in the latter group. This may begin to explain why, despite calls for unity, industry leaders struggle to engender a real sense of being as one amongst producers. There are also those who took matters into their own hands a long time ago, processing and marketing their own milk, switching to organic production, or developing very low cost systems to withstand price volatility. I would estimate that perhaps a third of those still in the game are either fortunate to be in the Haves group, or have established some degree of autonomy. With less than 10,000 disparate producers now left in England and Wales, a number of whom have no successors and no appetite for the continuing struggle, it isn’t hard to see why despite the shared fear and frustration, rallying cries for unity fail to muster the troops.
Right now, most of those who do want a future in farming are clinging to the rock that is their current milk buyer – fearing that any sign of disloyalty could be used as an excuse to prise them off and cast them adrift, with no home for their milk at all. With global supply continuing to exceed demand and the recent removal of quotas potentially pouring more milk into the commodity pool, we live in what is very much a buyer’s market. Producer Organisations (PO’s) such as that recently set up by farmers supplying milk to Dairy Crest create some badly needed negotiating power, but must offer buyers more than milk volume if they are to turn around the fortunes of their members.
Unity can deliver strength but it is enterprise that delivers value. Enterprise creates something new, something different and that’s what Free Range Dairy is all about. The Pasture Promise label, backed by independently accredited standards for free range milk production, now gives farmers a chance to offer something different by defining the value in their farming system. I’m sorry to say the generic promotion of milk will not deliver the reward farmers so desperately need and deserve. An assertion that all things British are great has failed many before us (witness the demise of the British car industry). Some farmers may regard differentiation as divisive but it is vital, if we are to create healthy competition and a vibrant industry. Far better we challenge ourselves to raise the bar than simply cut one another’s throats, as we are effectively forced to do now.