Milk prices have crashed under pressure from a combination of rising supply and falling demand, particularly as a result of lower-than-expected demand from China and Russia's ban on food imports. One factor that few people saw coming was Moscow's decision to ban EU dairy products, taken in response to sanctions over the Ukraine conflict, this has led to some 2.5 billion litres of milk not being sold in Russia.
The House of Commons Environment, Food and Rural Affairs Committee has revealed that Dairy farmers are being forced out of business every week by factors beyond their control. The Committee has called for the powers of the government's groceries watchdog to be expanded to cover dairy suppliers; The Westminster government has said that it was doing all it could to help farmers cope with the "volatility of the global market".
Despite all the rhetoric, I don’t expect the current or successive Westminster UK Governments to take any meaningful action to help our dairy farmers (or any of our farmers for that matter). Previous failures to act, I suspect are due to a combination of nice financial inducements from large Supermarkets and a more marked indifference to the agricultural sector.
At the end of the day if we want quality milk and dairy products (produced from UK milk or better made in Wales) then we will have to change the way we buy, then our farmers will get a better deal and we will get a quality product. One consequence of how we buy and how our milk is produced for us and how it is sold to us is that the number of dairy farmers in Wales dropped by a third in five years (up to December 2009) and this was despite repeated warnings that more needed to be done to save the industry.
Before our farmers, dairy or otherwise, are driven out of business entirely they need action not words. If our governments at all levels (including the as far as agriculture is concerned apparently indifferent Labour in Wales run Welsh Government) do nothing then the future for agriculture may be grim, semi industrial and serviced by cheap (and probably exploited) migrant workers. Industrial milk production much trumpeted by some as the saviour of the dairy industry but it is not without its problems.
There are waste issues, slurry production being one of them, which can be enormously toxic and environmentally damaging. There are also likely to be animal welfare issues when it comes to industrial farming. Modern cows to produce large amounts of cheap milk, a modern Frisian may produce as much 4 times as much milk as equivalent cows did 50 years but it only has three (milking years) in which to do this.
Historically the old answer to low milk prices or a surplus was to turn excess milk into other dairy products, like butter, cream, cheese and yoghurt's. The problem we in Wales face is that many local Welsh dairies serving our urban centres are no longer in business – some around Cardiff were bought up and sold off for housing and diary operations in some areas relocated outside of Wales. This means that we in Wales miss out, as Dairy products are potentially big business as some of our more successful smaller organic producers have proved.
The development of railway communications during the industrial revolution provided the means for rapid delivery of farmer’s milk to towns and cities and lead to a growth of diary production. The milkman delivered direct to our doorsteps, his near demise came later as a direct result of super market price-cutting which has now, more or less, effectively killed him off. The decimation of rural railways following a Conservative Government (questionably motivated) decision to favour road transport weakened the very infrastructure that had driven an expansion of the dairy industry.
A 29 or 30 pence (gate price) litre of milk may end up being sold for 15 times as much, people pay good money for ‘health yogurt’ – which with the addition of bacteria, flavouring and a marketing campaign produce healthy profits for the companies that produce them. We have some excellent and very successful companies and producers doing just that, but, this potentially profitable sector of the agricultural economy in Wales is undeveloped.
As for buying local - around 40 per cent of our yogurt is made in France and Belgium, in 2009 more than 40 per cent of all Cheddar sold in the UK was actually produced outside of the UK. Yogurt and cheese aside; its a pretty similar story when it comes to butter. The bulk of our butter comes from Denmark and Ireland, and this is despite the fact that farm gate prices for milk remain consistently higher in Europe than here in the UK.
We (in the UK) when compared with eleven years ago now import almost half of our butter from abroad, cheese imports are also up, some 60 per cent over the last eleven years (up to 2012). We are importing products that have added-value and are busy exporting the low-value milk products which are then ironically turned into butter, yogurt, etc and sold right back to us.
This is madness; this is what happens in the developing or third world, not in the first world. In the developing world many countries have little choice but to export their raw commodities cheaply and then have little or no choice other than to buy back manufactured products made from their own raw materials.
Over the last 10 years Supermarkets’ margins (e.g. the amount of the price they take) on milk have doubled. Now with a trend for both the processor and retailer to be the same, we have a situation where they take over three quarters of the price of a pint. We have now reached the situation where in a land once renowned for Dairy farming and with cheap milk, we are becoming a net importer of milk. There is little point in hoping that the Con Dem Government (or a future New Labour one) will get its act together because they just won't.