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Milk Matters By Christine Pedersen


Senior Dairy Business Consultant The Dairy Group


www.thedairygroup.co.uk


My last column covered the effect of the lack of rainfall this summer on dairy farming and we continue to spend a lot of consultancy time reviewing both the physical and financial impact of the drought. I think it’s fair to say that, for many producers, forage stocks will be ‘tight’ and most will have taken advantage of the recent good weather to extend grazing or make autumn cuts of silage. Needless to say we will be monitoring forage stocks against requirements very closely for all our clients this winter. There is much farming press coverage following the publication of


the Agriculture Act which sets out a policy framework for agriculture in England outside of the Common Agricultural Policy (CAP). Whilst it is clear that direct payments will be phased out over the next nine years and payment of DEFRA’s much hyped ‘public money for public goods’ will be phased in, there is little detail on what basis the support budget for farming will be made. My colleague Nick Holt-Martyn who is The Dairy Group’s Brexit expert says: “As in Defra’s previous missives, the Agriculture Act fails to say that market prices will need to rise to make good any shortfall in income but instead looks to farmers to tap into ‘overlooked efficiencies and expansion(!) into unknown markets’ as the solution. The simple reality of subsidies of course is that they enable us to continue farming at levels of market return that would otherwise simply be uneconomic. The retailer effect is to extract that income via lower prices to reward their customers with cheaper milk and dairy products.


Payment and was worth about 2.4ppl and based on quota held. Since then the number of dairy farmers has declined by 36% from 20,313 to around 12,500 today. Production is up about 1 billion litres, about +700 million litres above the 2005 quota level and the average production has risen from 691,000 litres to 1,180,000 per farm. The effect is to dilute down the value of the dairy element to 1.4ppl (5% of milk price). As this is phased out it will have to be met from the market place for milk production to achieve current levels of viability”. Against a backdrop of Brexit uncertainties and sharply rising cost


of production I find myself discussing strategies to deal with milk price volatility with clients, as has so frequently been the case over the course of my career in dairy consultancy. Dairy farmers know from experience that they need to operate robust businesses to cope with milk price volatility so they can ‘weather’ the periods of low returns. For every producer there are always a range of options to consider to profitably increase income (which generally means making better use of available resources), or reduce cost of production. There is a lot of discussion in the press about different systems/


calving patterns and which one is best. For dairy producers there may be a temptation to change system and/or calving pattern as a ‘golden panacea’ without understanding their current business. Cost of production analysis can be used to highlight strengths and weakness and, more importantly, identify opportunities for potential cost savings, but it is just a starting point to a review of resource utilisation. Any change will not elicit the desired response unless carefully budgeted as there is invariably a cost to change and the alternative needs to deliver a real improvement rather than just a perceived solution. I am ‘borrowing’ a quote from the brilliant “Resilient Farmer” (written


by Doug Avery) which really sums up the current position for many UK dairy farmers: “Reward lies in finding opportunities to mitigate risk, by doing nothing and not changing you actually heighten your risk”. There are many outside influences on farming that add risk. The weather and government policy being two that the reader will recognise instantly and know that producers have little or no control over these factors. It is important for farmers to recognise which factors they have at least some degree of control over to avoid wasting time and energy trying to control the uncontrollable. Several events have conspired recently to make me consider how


Source: The Dairy Group and Defra “The graph above shows how UK milk prices have fared over the


last 48 years. It includes the step changes from UK market deregulation, Agenda 2000 CAP reform and milk quota abolition. The effect of these market interventions has been to pull the UK farm gate price back from a possible 35-40ppl range to the 27-32ppl range we find ourselves in now. The next instalment will be Brexit; if the last 20 years are any indication, it will be a volatile experience at the very least. “The dairy element of the Basic Payment (BPS) that farmers receive started out as a Dairy Premium, but was subsumed into the Single


PAGE 12 NOVEMBER/DECEMBER 2018 FEED COMPOUNDER


the current Brexit uncertainties, rising cost of production and weather challenges might affect mental health. A colleague, Naomi Lee, recently attended the Women in Dairy conference and was fascinated by the findings of the ‘Focused Farmers’ study presented by Nuffield Scholar Holly Beckett. The results showed that farmers who had completed the 8-week programme showed a 21.3 % decrease in stress, 20.6 % increase in a positive mind set and 18.4 % increase in purposeful focus (source www.focussedfarmers.com). Any initiatives trying to break the stigma surrounding mental health issues in farming have to be good news in my view; a number of campaigns in the farming press and on social media have certainly raised awareness and, thankfully, mental health is less of a stigma that it once was in farming. Whilst we are neither qualified nor employed as counsellors, invariably many of us employed in allied industries develop close personal relationships with the farmers we have worked for several years or even decades and are often relied upon as trusted advisors and friends for support.


Comment section is sponsored by Compound Feed Engineering Ltd www.cfegroup.com


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