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Is the price of milk due to rise? How the milk crisis looks to a local dairy farmer

In the war that’s broken out between some of Britain’s dairy farmers and the big dairy processors something’s got to give.  Either we pay more for our milk, or the processors get less, or farmers are forced out of business.

The crisis has not gone away, it’s just taking an August break from its place in the headlines. A voluntary code of conduct for milk contracts has to be completed within weeks and the cuts in prices paid by the processors and some supermarkets have almost all been cancelled or postponed.

Farmers are still demonstrating outside milk processing plants. They obviously think the crisis will return soon – and they’ll be hit in the end with cuts to the price at which they sell their milk.

Tom Maidment and some of his Holstein heifersTom Maidment and some of his Holstein heifersTom Maidment’s family have been dairy farming in the Vale of Pewsey since 1887. They have lived through ups and downs in milk production and Tom takes the long view on the current crisis in the prices paid to farmers by the big milk producers.

He believes it’s a perennial problem. He remembers his father telling him how, before the war, he’d get an annual post card summoning him to London to sign the contract to sell his milk to United dairies’ plant near Paddington.

No negotiation – take it or leave it.  If he wanted his milk to leave Pewsey station each day and get a monthly cheque from United Dairies, he had to sign the contract.  And if he didn’t sign, United Dairies almost certainly had a drawer full of alternative dairy farmers willing to sign.

Those were hard times – his father took over the farm during the 1930s slump.  Then came the war and the post-war Labour government’s legislation to stop the nation ever having to import food again – learning the war’s dire lessons – and the birth of the statutory monopoly of the Milk Marketing Board (MMB) which brought stability to dairy farming.

The MMB vanished when the Tory minister Gillian Sheppard refused to legislate to maintain its monopoly.  It was replaced by a nationwide co-operative which the dairy farmers’ other political villain, Labour’s Stephen Byers, ruled to be uncompetitive.

“Since the MMB went, farmers haven’t had enough strength in the market place.”  But it was not all bad news.  Out of that double display of politicians failing to support farmers, there emerged in the south of England a co-operative called Milk Link.  It is a flourishing co-operative with a membership of 1,500 British farmers.

As a member of this co-operative, Tom is largely insulated from the present cuts in the price paid for milk.  He gets 27p per litre and he accepts that the co-operative has to take a premium to invest in its future and keep its equipment up to date.

There are three dairy farms around the village of Wilcot. Tom has five hundred cows in his pure-bred Holstein herd.  Of these about one hundred and eighty are in milk at any one time.

Unlike arable farmers who sow and reap well within a twelve month cycle, dairy farmers have to invest ahead. It takes three years from insemination to rear a calf and get it into milk.

Looking at the industry as a whole, Tom says there are still “Enormously powerful milk buyers, under enormous pressure from retailers, putting unsustainable pressure on farmers.” And he cannot understand the increasing profit on milk sales taken by the retailers.

In 1996 retailers’ profit on milk averaged 2.6p per litre.  It’s now about 13p per litre.  And over that time farmers’ costs – in electricity, cattle feed, bedding, vets’ fees and so on – have risen massively. “I don’t”, says Tom, “see why the fundamentals of this tussle should change.”

For most dairy farmers, buyers will still write contracts and set prices. Will the promised code of conduct change things enough?

The current crisis was said to be caused by the fall in the world price for cream. This is vital to processors because the more low fat milk we buy, the more cream they have to extract from whole milk and the more cream they need to sell on to meet their business plans.

There is some scepticism about the claims by some supermarkets that they pay their farmers well and look after them.  Many of their contracts demand a fixed amount of milk every day of the year. This forces farmers to change calving regimes and keep cows inside for more of the year – which forces their costs up considerably.

Just over the horizon there may be change on the way. In 2015 the EU’s national production quotas will disappear and countries will be able to produce as much milk as they want. Already the Republic of Ireland, with its long established and secure base of co-operatives, is planning to step up its milk production.

Britain has lost about twenty thousand dairy farms since 1996 and produces well below its annual EU quota of fourteen billion litres. Some people forecast another four thousand dairy farms may be lost soon. Giving farmers a fair return so they can invest in herds and equipment should be a political aim if in the future we are not due to import much more of our milk.

However, if that all sounds pessimistic, Tom and is wife Molly are “fairly positive” about the future of British farming. It was during the 1970s and 1980s with the surpluses and the Common market’s various food ‘mountains’, that British farming “lost its zing”:  “The tide changed – as it does.” 

Now it’s changing again: during the current recession they’ve seen a real increase in interest amongst young people in farming as a career.  “Young people are becoming positive about farming again.”

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