British milk producers facing £330m losses as costs escalate

The scale of losses being faced by UK milk producers was yesterday put at a staggering £330 million as a result of the gap between the price paid for milk and the costs of producing it over the past year.

The Cost of Milk Production report reveals that British dairy farmers are, on average, losing more than three pence on every litre of milk they produce.

With 11 billion litres of milk produced annually on dairy farms across the country, this equals a massive 330m gap between production costs and the price received by British dairy farmers.

Mansel Raymond, the chairman of the dairy committee of NFU of England and Wales, who collated the information, said the stark figures revealed the very desperate situation on many dairy farms.

"It won't be a surprise to the many farmers out there who are trying to make a living. The irony is that if dairy farmers had received their fair share of available market returns this year, we wouldn't be faced with such a staggering gap between the price we're paid for our milk and the cost of producing it."

Speaking on behalf of NFU Scotland, George Jamieson, milk policy advisor, put the Scottish share of the estimated losses at 40m out of the total.

After congratulating the English NFU for carrying out the work, he said losses of the scale being experienced were "undermining confidence amongst dairy farmers and stymieing the development of the industry".

Yesterday's move is the latest in a winter of discontent in the diary industry which has seen demonstrations both at distribution depots and outside supermarkets.

Part of the problem has been the increase in milk production costs, especially feed prices.

The report shows that feed costs in 2010-11 are forecast to be 16.6 per cent higher than in 2009-10. Bedding costs have also risen by 13.8 per cent over the past year.

These increases have pushed the average cost of milk production to 29.1 pence per litre.

With an average British milk price of 25.94ppl, this results in a 3.16ppl gap between the cost of producing milk and the price the farmer receives.

Looking on the world market, Mr Jamieson pointed out that the markets for milk and dairy products, such as cheese, butter and milk powder, are flying, and there is no justifiable reason why Scottish producers should be held back from sharing in the buoyant trade.

"Long-term, we need to examine the way retailers manage to manipulate the whole supply chain for milk and dairy products to benefit primarily their own ends.

"At the same time, there must be a fresh look at the contractual arrangements between dairy farmers and their milk buyers," Mr Jamieson added.