IP Dairy Farmer - June 2020

Posted on: 01/06/20

Last month’s scaremongering suggesting the UK dairy industry was heading for Armageddon was dismissed by all but a minority of dairy farmers. There are tough times, for some, admittedly, but no Armageddon.

However, the English and Welsh Governments have been persuaded to launch dairy farmer hardship funds of up to £10,000, which was greeted by some farmers as disappointing, embarrassing and ill-conceived. Admittedly on further enquiries none of those commenting appear to be suppliers to either Freshways or Medina or others, and thus on the receiving end, of them, so they are unlikely to represent the views of likely applicants. Those who commented believe the aid should go to the NHS and others on the front line and not to farmers. Some of the comments were uncharitable, unprintable but passionate, with one commenting “Let’s face it dairy farmers have more security than Mr. or Mrs. Average and won’t face real hardship”.

As I pen this article the main concern is that the £10,000 aid will be seen as a green light for one or two unscrupulous processors to drop their farmgate milk price further, extend credit terms and generally duck and dive to ensure the main beneficiary is them and not its farmers. I’m not sure it will happen, but I will be watching the timescale between farmers getting the money in their hands and the action that some processors might take. Apparently the RPA is doing the administration. Good luck with that then!

The UK dairy industry has challenges, but it is questionable whether it has the urgency for hardship aid that others certainly have. Sadly £10,000 from the fund will only delay the inevitable for those who are unable to face this short-term challenge head on.

During Covid 19 meat and dairy sales through one of our biggest retailers are up (with meat sales by +30%). Meanwhile, sales of plant based so called milks and vegan products have been static or declining so I am told, to the point one retailer is questioning why they command the amount of shelf space they currently enjoy. So, amidst this terrible pandemic our No 1 customer, the Great British public, are drinking more milk and eating more British dairy products. Is it possible the majority of consumers have realized a plant based diet will not save the planet or feed their families let alone the world? Marry this to the vast majority (80% +) of consumers who are convinced we are heading into a post Covid 19 recession. Those 80%+ will, by nature, be more concerned than others have been since the second world war about the food on the table, and how they will pay their mortgages and rent. This must be a golden opportunity for the UK dairy industry to re-in force its efforts to promote and protect its brand and image of the dairy staples, especially in areas like animal welfare.

One or two processors have, to date, dismissed increased standards and turned a blind eye to policies on unwanted bull calves, wanting its farmers to do the bare minimum and simply deliver white watery stuff. But that’s now starting to bite them as food service join retailers in wanting farmers and their animals to be treated fairly and with respect.

So as far as the domestic dairy markets are concerned there is light appearing at the end of the tunnel, with demand nudging north on a daily basis as people push for some form of normality.

But one or two processors are firefighting and appear to be passing any pain directly to their farmers whilst others are taking a sensible measured path with a medium to long-term view wanting to minimize the impact on farmers by smoothing out the cashflow trough as much as they can in a bid to ensure they have adequate deliveries in the second half of 2020. They are paddling like hell to treat their farmers fairly and responsibly, knowing that if they succeed customers will react positively and want to be associated with the processor and its farmers.

Others, which some refer to as the chancers and duckers and divers, are focused on the here and now and are trying to salvage, or in some cases pocket the money, with slash and grab tactics. i.e slash the farmer’s milk price, extend his credit, and pocket a processor margin irrespective of the situation and how tough the farmers struggle is. Everyone knows who they are.

This crisis has certainly highlighted the true colours of some processors and exposed some who are swimming with no trunks on now that the tide is out. Their way of working appears to be doomed to fail, the only question is how long they can hang on before the axe falls, and what damage will be done to their suppliers in the meantime. Having said that the bottom line is no one is making any money out of the UK liquid business, as this column and others have frequently discussed and proven before. Maybe this sorry Covid episode will change all of that.

Dairy products and food are simply taken for granted and we know milk is too cheap to be sustainable. The same can be said for chicken, carrots and lettuces etc. Until retailers value the UK dairy products which are produced to higher standards, with better welfare of the animals and people involved and the environment this crazy circle will never be broken. Then throw into the mix a post Brexit scenario of food imported to much lower production standards and we will forever scratch with the hens.

Our dairy products tick all the boxes and are wholesome and nutritional and I don’t believe cheaper and better or equal products are available from abroad. Customers will pay for the extra environmental and welfare standards, but will retailers and food service pay? It can’t come FOC!