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South West farming businesses and producers still making a loss on milk

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Written by:   | Posted 03-October-2013 6:44

Thousands of dairy farmers are still losing money on the milk they produce, accountants confirmed yesterday.

And recently announced price rises of one or two pence by the major processors will go nowhere near putting them straight. The warning came yesterday – as reported in the Western Daily Press – at the Bath and West Dairy Show as accountants Old Mill described 2013 as an "annus horribilis" for many dairy producers. They said the year had brought a perfect storm of high feed costs and bad weather – and the usual time lag of milk buyers responding with better prices.

Many major processors say they are increasing prices by this month with the promise of more to come. But that will still leave many farmers well short of the 38.02 pence a litre they need just to cover their costs, Old Mill director Pat Tomlinson warned. Production costs have risen by 3.69 ppl over the year, with dearer feed accounting for 2.12pence. Yet, said Mr Tomlinson, Old Mill’s clients only saw their milk price increase by 0.62 pence over the year.

"Milk prices received barely increased in the year, despite all the public announcements on standard litre prices," he said. The production figures do not include anything other than the actual costs incurred by the farmers. There is no allowance for unpaid labour, return on capital or theoretical land rent.

Somerset dairy farmer Derek Mead said the figures confirmed what many farmers already knew – that it was impossible to make a profit from milk on the current prices being paid by processors.

"When you look at the gap that has now opened up of around five pence between what they pay and what farmers need just to break even it makes the penny or so extra they are preparing to pay look really derisory," he said. "The only people who would argue with this are the accountants who are employed by supermarkets to calculate production costs for their own suppliers. Other farmers have always been sceptical about these assessments and this independent opinion from Old Mill shows them in their true light."

ARLA Foods became the latest buyer to raise its prices yesterday, announcing a 1.5ppl increase for its direct suppliers with effect from November 1. The increase will be applied to the base price and takes the standard litre to 33.13 pence.

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