Dairy farmers face 330 million deficit as costs outstrip milk price

A staggering 330 million gap between the price paid for milk and the costs of producing it have been revealed in a report published by the NFU today.

The Cost of Milk Production 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 330 million gap between production costs and the price received by British dairy farmers.

The report shows that by far the biggest factor adding pressures to a sector already struggling to turn a profit is the huge increase in feed and bedding costs.

NFU dairy board chairman Mansel Raymond said: These stark figures reveal the very desperate situation on many dairy farms and wont 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 wouldnt be faced with such a staggering gap between the price were paid for our milk and the cost of producing it.

It is true that prices have started to move up but some milk buyers have told their farmers to expect only a penny increase. Thats a drop in the ocean given the scale of the price problem we are faced with. Im seriously worried that for many dairy farmers it could be too little, too late.

Contributors to the NFUs Cost of Milk Production report were Kite Consulting, Promar International, Kingshay, The Dairy Group, Andersons and DairyCo.

         The respondents together provided data covering 809 dairy units and provided actual costs for April 2009 to March 2010 and projected costs for April 2010 to March 2011. Any adjusted forecasts to reflect exceptional rises in feed prices were also incorporated.

         According to the NFU report, the average cost of milk production is currently 29.1 pence per litre (ppl). 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.

         By far the biggest contributing factors to the increase in milk production costs are increases in 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 risen by 13.8 per cent over the past year.

         The NFU and the WI launched the Mission Milk campaign in November 2010.