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Posted in Posts
January 14, 2019

Dairy Farming UK – making it sustainable

British farmers are amongst the best in the world at providing the highest quality food and produce adhering to the highest standards of stockmanship and husbandry.

Dairy cows grazing
Dairy cows grazing

Some Dairy production statistics

  • Between 1996 and 2015 the number of dairy cows in the UK dropped by 27% to 1.9 million
  • Between 1995 and 2014 the number of dairy producers fell 61% to 13,185
  • In 2004 the average dairy holding had 97 cows and in 2014 the number was 133 cows per holding.
  • Even though the number of cows and producers has fallen over the years, the yield per cow has increased. In fact cows today are producing 97% more milk than the cows in 1975.
  • In 2014 3% of the milk produced in the UK was exported.
  • For the year ending May 2018 the cost of milk production ppl (pence per litre) was between 25.5ppl and 34.5ppl.
  • The average UK price paid to producers in November 2018 was 31.61ppl.
  • This gives a profit of 7ppl or 22% or a loss of 2 ppl or -6%
Pouring a glass of milk

The way we shop for milk

The way we shop has changed dramatically over the years. Just sticking to milk production we can see that in 1995 45% of the milk in the home was bought by doorstep delivery (the milkman). Fast forward 10 years and only 3% of milk was purchased by doorstep delivery.

Why the huge drop? Price has to be a big part of it, the cost of a pint of milk delivered rose from 37.9p in 1995 to 81p per pint in 2015, a 114% price rise. The price of a pint of milk from a retailer rose from 23.9p per pint in 1995 to 24.8p per pint, an increase of only 3.8%.

When faced with the choice of buying a pint of milk for 81p or 24.8p it’s easy to see why the milkman is a rare sight these days.

How do supermarkets sell milk so cheap?

There are two main ways in which retailers manage such aggressive pricing of milk.

  1. The loss leader, the retailer itself will make a small loss on the milk it sells in order to get the customer in to its store and then encourage them to purchase other items by aggressive marketing, advertising and displaying of the items. Sugar is another popular loss leader.
  2. Pure buying power, the major retailers buy huge quantities of milk and their buyers are very good at telling processors what they are willing to pay which dictates the price the processor pays the producer.

General trends in dairying

Firstly, how many other industries would continue in business on such small potential profit margins or operate at a loss? Let’s look at the profits of one retailer in the UK. For 2017/18 this retailer made, after tax, £309 million profit. The retailer in question is J Sainsbury plc.

As seen earlier on, the number of dairy farmers in the UK has dropped but the number of cows and the yield from each cow has increased. This is where economy of scale comes into play, feed, electricity, labour, veterinary care, machinery etc. may increase in total but per cow will reduce. Then by maximizing the quantity of milk produced per cow by optimizing the diet, breeding, building management, improving the quality of home produced feed etc. the cost per litre of milk produced is reduced. The days of the small family dairy farm being sustainable have disappeared.

If this trend continues we will end up with fewer ‘mega’ dairy farms including those where the cows are housed all year round. I don’t believe this is what the general public wants to see but it will be forced upon farmers unless the price paid to farmers per litre of milk rises to sustainable levels.

The Solution – for British Farming

Government needs to change

The UK Government must be strong and support UK farmers by ensuring imports are only allowed for produce not able to be produced in the UK or not able to be produced in sufficient quantity. When imports are allowed the produce must be produced to the same or higher welfare and quality standards as UK produce.

Farmers need to change the way they conduct their business

Farmers must change the way business is conducted. Stand strong and set the starting price when negotiating prices for their produce, safe in the knowledge that the major retailer is not going to be able to import cheaper produce. The inputs in agriculture are always increasing, the chemical manufacturers, fertilizer manufacturers, fuel companies, machinery companies, veterinary supplies etc etc. all set a price for their product and the farmer pays it, yet lets the retailer tell them what they are going to pay!

Educate the consumer

The consumers must be educated, there have been great strides in agricultural education over recent years, but it doesn’t go far enough. The major retailers spend millions of pounds each year on advertising, they are not just publicising their products but actually using psychological tricks to shape the way customers shop.

Learn from ‘anti’ campaigns

Other groups are also very good at this type of ‘campaign’ – Veganuary, anti-hunting, Green Peace etc. All of these groups not only promote a positive message but also exaggerate the negative. Bull calves being killed, dairy cows as milking machines etc. etc. They are sending a negative message to the public who have no or little knowledge of the reality so see the industry as ‘bad’. They pull at heartstrings just as advertisements raising money for charities do.

If you look at some of agricultures recent campaigns they tend to concentrate on the positives, eggs are good for you, milk is good for you, beef is good for you etc. We need to start showing the flip side. Show customers how their food is produced and how it will be produced if trends continue.

Farmers know what the reality is and what the future of food production, the British countryside and retailing looks like unless change happens soon.

Use skills of food manufacturers and Independent retailers

Farmers need to combine forces with food manufacturers and the independent retailer. Look down your local high street and count the number of independent butchers, green grocers, bakers etc. Few or none is my guess. Those independent retailers still in business have demonstrated an understanding of what their customers want and how to adapt their service, advertising etc. to suit. It is these skills that are required to help save farming as we know it.

Use the skills of all those involved in the food chain to produce campaigns targeted at making the customer feel content that they have bought high quality and welfare produce at a value for money price which provides a profit for all involved.

Your thoughts?

Well what do you think? I would love to hear your thoughts and ideas. There is a lot of skill and knowledge out there and together I am confident British farming can be saved.

Thanks for reading

Justin

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