Your browser is out-of-date!

Update your browser to view this website correctly. Update my browser now

×

InFocus

Surviving the global milk crisis…

Veterinary Practice reports on Tim Brigstocke’s presentation at VetsSouth 2016 and the lively discussion which followed.

EVERY VETERINARY SURGEON IN CATTLE PRACTICE will be aware that the milk industry is in a mess. There is a low level of confidence throughout and it has been suggested that some 4,000 dairy producers will leave the industry in short order. Many of the production costings specifically state that the figures refer to conventional milk production but this approach is to change.

Tim Brigstocke, policy adviser to the Royal Association of British Dairy Farmers, gave details to the vets who attended the large animal day at VetsSouth 2016 in Exeter and considerable discussion followed.

He noted that there are many varieties of milk ranging from “Ordinary” to “Specially Selected” to “Farm Assured” with likely premium added for “Regional”, “Pedigree” and “Organic” milk. Breed-specific and branded milks such as “Ayrshire” and “Breakfast” attract further premium prices. This trend is expected to develop further with the milk industry increasingly being urged to “talk up” milk as a food and learn from others.

Back in 1984 25% of the milk produced in the EU was surplus to requirements and milk quotas were introduced. Since then the Milk Marketing Board (1994) and Milk Marque (2000) have gone, with a subsequent fall in relationships between processors and retailers.

The abolition of quotas is said to have had little national impact in the UK but other countries are expanding cow numbers (e.g. Ireland). Historically, dairy farmers are said to have had a culture that “after the farm gate has nothing to do with us”.

Management vehicle

Contracts for raw milk supply, in order for processors and retailers to control supply volume, will become the management vehicle. As supply rises above processors’ needs, the price will fall. Farmers who have liquid milk contracts with supermarkets are expected to have viable businesses. It is difficult to be accurate and the figures will change, but such contracts amount to half of the milk produced and perhaps one third of the producers.

Globally, the top 10 dairy companies account for 25% of total milk production with Nestlé having the lion’s share at 5%. By comparison, five companies control 90% of the world grain supplies. In Britain, the seven largest milk buyers purchase 80% of production.

Mergers and acquisitions are continuing but currently Arla and Muller Wiseman are dominant. The NFU has produced a forward plan that includes greater involvement within the supply chain of new dairy producer organisations. There have been some spectacular failures of such arrangements but it is believed that lessons have been learned from past difficulties.

Whatever the definition of such businesses there is a belief that the management will need to be totally focused on success. “Managed like a plc” is a phrase commonly voiced. There is considerable emphasis on the need for fairness in the supply chain and for the Grocery Code Adjudicator to referee milk pricing. In 2014-15 the DEFRA Farm Business Survey indicated that 31% of dairy farm business income came from the EU Single Payment Scheme. This compares with 57% for lowland grazing farms, 66% for farms in least favourable areas, 28% for specialist pig herds and 17% for specialist poultry units.

A critical point for many is whether the UK Government would replace the EU contributions if Brexit occurs. The margin over production for dairy was 4.6p/litre in 2013-14 and estimated to be zero for 2015-16. The overall EU contribution is currently expected to be 1.5p/litre with considerable individual farm variation.

Many herds – some assessments put it as high as 80% – have production costs of over 30p/litre. Roughly, fixed costs account for half of the calculation for herds over 100 cows. Within the variable costs, vets and medicines are put at 6% or 3% of the total. Sacking the vet is not going to increase profitability!

Increasing herd size is one way to reduce the costs of production per litre but it seems unlikely that there will be a significant increase in the formation of super herds of over 1,000 cows. Planning restrictions and environmental concerns are highly influential. What is anticipated is an enlargement of farm businesses with collaboration in sharing machinery and other assets, group buying, group marketing and diversification.

A greater dedication to certain customers and markets is expected and supplying product to satisfy the needs of that outlet.

This will require close co-operation between producer, processor and retailer to offer product attributes supported by strong product branding. The milk levy on every litre produced, currently paid into a pot held by the Agricultural and Horticultural Development Board, is expected to support branding.

A major change is also anticipated in the way milk is produced, with a movement away from the traditional winter housing and grazing to a pasture-based production system.

Lack of training

There is huge criticism of the lack of training available throughout the dairy industry. At present, an increasing number of veterinary practices are involved with technical training for clients and training by vets of people engaged in purchasing, processing and marketing of milk is anticipated.

Dairy industry managers have presented at the BCVA congress and generally the line has been to demonstrate their needs from the farmer and his vet. In future there may be demands from farmers and their vets for industry to match their requirements to successfully market specifically high standard dairy products.

It is difficult to imagine a group of circumstances that would better illustrate the bene t of excellent veterinary support for dairy farmers. Applications from practices and practice groups for training budgets should be increased tenfold with tangible recordable benefits.

Back-up and monitoring of all health and welfare matters and the ability to demonstrate to buyers the advantage of the very best practices within the herds of clients is essential.

The involvement of veterinary surgeons at every stage of the food chain is foreseen, truly “from farm to fork”. To retain the volume of cattle work may be seen as a short-term problem but there is a positive future for dedicated and committed specialists.

Have you heard about our
IVP Membership?

A wide range of veterinary CPD and resources by leading veterinary professionals.

Stress-free CPD tracking and certification, you’ll wonder how you coped without it.

Discover more