Farmer warns global milk supply glut is putting UK dairies at risk
A farmer has warned a glut in global milk supplies risks dairies across Britain going bust. Farmers in the UK were told by Freshways earlier this month that the national dairy supplier had to throw milk away over Christmas because of excess supplies. It came as dairy markets were flooded with milk from producers in the UK, North America, Europe, New Zealand and Australia.
Dairy farmer Paul Tompkins runs South Acre Farm, a third-generation family farm in the Vale of York. He said: "Most dairy farmers are under severe economic pressure with most seeing prices drop by 25%. When you operate on thin margins of one or two percent, it's a significant blow."
Mr Tompkins estimated that 80% of UK dairy farmers are in a position where the price of milk is less than the cost of production.
He warned while some will have the financial and emotional resilience to weather the storm, some will be looking for a way out.
The father-of-two, who chairs the Dairy Board at the National Farmers' Union, said he has seen farm gate prices drop from 41p to 42p per litre to the low 30s.
Prices rise and fall according to supply and demand of course, but Mr Tompkins said dairy farmers have seen such a big drop this time. He calculated South Acre Farm is losing £1,800 every single day because of the supply issue.
Mr Tompkins, 46, said: "The truth is you do worry. But you have to find a way to be optimistic.
"But for some farmers that emotional resilience will be too difficult to find. Some farmers' banks will find it too hard to find the economic resilience.
"I would not be surprised if some dairy farmers leave the industry in the first half of this year. Economically, this is tougher than Covid."
Farmers' ability to reduce supply is limited, given cows still have to be milked and dairies cannot be temporarily closed because they require constant maintenance for hygiene reasons.
Mr Tompkins warned that with two to five percent of dairy farmers leaving the industry per year, Britain can ill afford to lose more.
He said: "Food security requires a diversity of farms continuing to produce food even when we have shocks."
The former financial sector worker explained that last summer's weather, feed prices and the sheer number of cows has led to excess supply around the world.
He said while demand has grown "a little bit", it is not enough to keep up with production, adding that analysts expect prices to recover in the second half of this year.
Mr Tompkins warned the UK still needs to be in a market where there is massive demand, but the industry has to remain competitive.
He said this means farmers need fair, sustainable prices so they can remain viable in periods of growth and decline, but there is "no silver bullet".
Better understanding of the market, improved efficiency and greater investment in Britain's "fragile" food supply ecosystem are among the fixes he put forward.
Legislation on contracts between farmers and suppliers which came into force in July last year also raise hopes dairy farmers will benefit from greater transparency and accountability over how prices are set.
While Chancellor Rachel Reeves' U-turn on inheritance tax was welcomed by Mr Tompkins, he said further demands on farmers such as meeting environmental regulations and biodiversity requirements only add to costs.
Mr Tompkins said some shoppers may welcome cheaper prices, but in the long run they will "dilute" a farm's ability to produce food as there are fewer profits to invest.
He nevertheless welcomed Brits' continued support for British produce and farmers, saying: "We hugely value the close relationship farmers have with shoppers.
"It's a huge thank you from us to them for continuing to buy British. They do more than just keep farms going, they keep rural Britain going."
Like Mr Tompkins, the Government expects the market to correct and profits to return amid a "difficult and challenging time".
A Defra spokesperson said: "This Government backs our hard-working dairy farmers and recognises the pressures that they and wider sector face.
"We want to see fair supply chains and transparent dairy contracts for our dairy farmers."