Dairy farmers set to suffer annual milk price decline

By Noli Dinkovski

- Last updated on GMT

The UK’s top dairy farmers are still managing to make a profit, according to Old Mill
The UK’s top dairy farmers are still managing to make a profit, according to Old Mill

Related tags: Dairy farmers, Cattle, Cost

Dairy farmers are set to lose more on the value of their milk in 2016/17 than in the previous 12 months, despite recent positive moves from processors to raise prices, an accountancy firm has revealed.

Producers lost 2.71p per litre (ppl) in 2015/16 and are forecast to lose 2.81ppl in 2016/17, according to Old Mill.

While there was a marginal increase in milk prices towards the end of 2016, extended low returns and higher production costs meant there wasn’t the “sharp improvement”​ in fortunes dairy farmers were hoping for, a report from the firm claimed.

Based on analysis of clients’ accounts with a March 2016 year-end, and working with the Farm Consultancy Group to predict future trends, Old Mill calculated that milk prices averaged 26.34ppl in 2015/16 and will only rise to 26.50ppl in 2016/17 – compared with a cost of production of 29.05ppl and 29.31ppl respectively.

Non-milk income

However, when non-milk income – such as from calf and cow sales – was included, producers averaged a small profit of 0.99ppl in 2015/16, set to rise to 1.08ppl in 2016/17.

The report said it was important to bear in mind that these figures didn’t include the single payment, rent, interest charges, drawings or tax but did include depreciation and an imputed charge of £28,000 per person for unpaid labour.

“It’s encouraging to see that, even in these tough times, the UK’s top dairy farmers are still managing to make a profit,”​ said Andrew Vickery, head of rural services at Old Mill.

“All producers have looked hard at their cost base and found ways to reduce expenditure. However, while many have improved efficiencies, there is now very little meat left on the bones for any further cost reductions.”

Fifth consecutive month

First Milk raised its milk price for November – its fifth consecutive month of increase. Prices for its ‘A’ members have risen to between 20.19–22.98ppl, depending on region.

Müller, meanwhile, increased its milk price by 1.5ppl for November, to 20.94ppl. In addition, its non-aligned dairy farmers will receive a retailer supplement of around 2ppl.

The November increase also completed a price harmonisation process between Müller’s two farmer groups following a request from the Müller Milk Group board, an elected group of farmers who represent the wider membership.

IFCN Monitoring recently predicted that there would be 40% fewer dairy farms in western Europe within 10 years.

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