Dairy sector under pressure

Many dairy farmers are facing challenging pressures on milk price this summer. One of the underlying causes is the 2003 agreement on the reform of the Common Agricultural Policy's dairy regime, where it was agreed by the European Council of Agricultural Ministers that support prices for skimmed milk powder and butter would be reduced by more than 20pc over four years, starting in 2004.

Many dairy farmers are facing challenging pressures on milk price this summer.

One of the underlying causes is the 2003 agreement on the reform of the Common Agricultural Policy's dairy regime, where it was agreed by the European Council of Agricultural Ministers that support prices for skimmed milk powder and butter would be reduced by more than 20pc over four years, starting in 2004.

Ministers also agreed to introduce the Single Payment Scheme, and its associated features of de-coupling, cross-compliance and modulation. Such was the significance of the agreement on these changes to the CAP as a whole, that the dairy reform measures received far less attention than they deserved.

On the face of it, there are not too many similarities between Welsh dairy farmers and English sugar beet producers.


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Having returned from three days in Norfolk where many farmers are facing an uncertain future with sugar beet - a key feature of the county's farming, I was struck by the similarity of the challenges.

Support prices for skimmed milk powder and butter are being reduced throughout the EU, it was agreed that support measures for sugar producers would also be reduced - by even more than the reduction in dairy support.

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They will receive some compensation by an enhanced Single Payment, but just like milk producers, no one knows what the future price will be.

The other similarity that many milk producers and sugar beet producers share as they contemplate the future is that they effectively only have three choices: to stop producing; to produce for a price that's below their cost of production; or try to manage their costs to ensure that production remains profitable in the future.

It's often difficult for farmers to see how it is possible to reduce costs any further than they already are. One avenue is collaborating with other farmers.

I was asked by the English Farming and Food Partnership to chair a meeting in Cornwall to promote examples where dairy farmers have been able to reduce their production cost.

There are a number of successful examples where farmers have reduced costs through sharing cows, quota, parlours, machinery, labour and knowledge.

The most impressive example, and the one that may be the easiest was the example of a group of four neighbouring dairy farmers from Wiltshire, who cut their costs by sharing a feeder wagon.

It struck me that this is just the sort of innovative thinking that is required if dairy farmers are to continue to be able to produce milk at a cost below the price they receive. As a young dairy farmer told me: "We don't have to change - survival is not compulsory"!

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