Azhar Zouq, md of Lancashire Farm Dairies in Rochdale, said some larger manufacturers were paying as much as 3p below the cost price per litre of milk, making dairy unviable for many farmers.
Zouq said challenging market forces, namely the EU removing milk quotas last spring and Russia’s ban on EU agricultural imports, were being aggravated by “bigger manufacturers, under pressure from retailers, trying to manipulate things further”.
“They don’t want the milk price to recover, because it means less margin for their products. It’s getting to the point where farmers are being forced to sell their herds and walk away,” he said.
According to Zouq, Lancashire Farm Dairies paid a “fair price” to the 20 or so dairy farmers it received milk from, but the fact that others weren’t meant the yogurt market was becoming saturated.
“There are more yogurt products on the market than ever before,” he said. “You only have to walk down a supermarket yogurt aisle to see it is an exceptionally saturated place.
“And when you’re competing with other manufacturers that are paying a lot less for their milk, it becomes even more difficult.”
The latest figures from the Department for Environment, Food and Rural Affairs showed the average UK farmgate price stood at 24.23ppl (pence per litre) in October a 2.6% increase on September. However, the October 2015 price was 18.3% lower than the same month last year.
Milk production up
EU milk production is up by an average of 3% year-on-year since the effect of the EU quota removal started to take hold, according to the latest market-price equivalent update from The Dairy Group.
“EU/UK SMP [skimmed milk powder] prices are back down to intervention levels, suggesting the market remains firmly rooted on the floor,” said principal consultant Nick Holt-Marytn. There remains little to suggest that 2016 will herald any improvement, he added.
Last month, Morrisons announced it was raising the retail price of its milk and the amount it paid to farmers.
Watch our video interview with Zouq to find out how having to remove the word probiotic from Lancashire Farm Dairies labels had failed to damped sales.