Dairy Farmers To Go Out Of Business On Collapse Of Milk Prices

[crashmonitor]

With the Russian blockade of EC milk, prices to the farmer are now much less than production cost.

I guess some sympathy is due for working 100 hours a week for nothing. Nevertheless, most are millionaires on paper at least, courtesy of land prices at around 10-15,000 an acre. Now used as an inheritance tax free vehicle for the super rich.

Sums up the UK economy...business doesn't work but we have an asset boom on land that makes nothing. A bit like houses really, pay through the nose for a liability that makes nothing.

http://www.bbc.co.uk/news/uk-england-somerset-29548159

Edited October 10, 2014 by crashmonitor

[crashmonitor]

Meanwhile, food deflation bring it on as far as I am concerned.

(57p to 49p for the litre of UHT I buy)

Edited October 10, 2014 by crashmonitor

[Sandwiches33]

So deflation it is then? I remember some debating on here that when it starts to go tits we could either go inflation or deflation. Its looking more and more like we are in deflation now. I seen the type of olive oil spread I use drop ten pence last week.

Just need that deflation in houses now which looks like its starting too.

[Wurzel Of Highbridge]

And there was me believing that the Chinese were buying everything :-)

[19 year mortgage 8itch]

And there was me believing that the Chinese were buying everything :-)

Lactose intolerant.

You can drink all the milk you like but it'll be bug and snails for meat.

[Timak]

Given my kids are getting through about 16 pints a week I'd like to thank the hardworking milk producers of this country for working for free.

[GloomMonger]

Milk is ridiculously cheap. I would happily pay more to keep farmers and their cows in work and to keep fresh milk in the shops. Have you tried UHT milk?

[BalancedBear]

With the Russian blockade of EC milk, prices to the farmer are now much less than production cost.

I guess some sympathy is due for working 100 hours a week for nothing. Nevertheless, most are millionaires on paper at least, courtesy of land prices at around 10-15,000 an acre. Now used as an inheritance tax free vehicle for the super rich.

Sums up the UK economy...business doesn't work but we have an asset boom on land that makes nothing. A bit like houses really, pay through the nose for a liability that makes nothing.

http://www.bbc.co.uk/news/uk-england-somerset-29548159

I'm not sure that farmers want land to be worth so much. The value of the land is not something which can be realised unless it is sold. I'm always amazed by how many people on this forum scornfully say how much house or land is worth to someone who needs that property to live or work. The value is an irrelevance unless it is sold, and many of these people would rather the prices were not stoked higher by speculation.

Farms only escape IHT if they are actually properly farmed. If you own a farm but do not farm it, then IHT may be due. So even the rich investors will still need to pay to have the land farmed. It is another example of high taxes skewing a market.

[Ames]

Nevertheless, most are millionaires on paper at least, courtesy of land prices at around 10-15,000 an acre.

Not if you are a Tenant Farmer. All you own are the cows and a few bits of equipment.

[TheCountOfNowhere]

Lower prices...how can this be good news !!!

All those people that were sold a house over the last 10 years thinking inflation would make it easy to pay it off are in for one f**king big shock.

Edited October 10, 2014 by TheCountOfNowhere

[a literal house]

I know nothing about how farming works, but the story makes no sense to me. Who has "cut the price they are paid by 25%"?

Surely the price farmers sell at is their own decision? Why are they agreeing to sell for less than cost?

[BalancedBear]

I know nothing about how farming works, but the story makes no sense to me. Who has "cut the price they are paid by 25%"?

Surely the price farmers sell at is their own decision? Why are they agreeing to sell for less than cost?

I think one issue is that there are a few large buyers - the supermarkets who tell farmers how much they are prepared to pay.

[Liquid Goldfish]

I think one issue is that there are a few large buyers - the supermarkets who tell farmers how much they are prepared to pay.

Weren't the supermarkets recently fined by the OFT for voluntarily paying the farmers more than the market price for milk - abiout 3 years ago?

[Liquid Goldfish]

Do they get CAP payments to make it worth their while - I thought that was the point of the CAP? i.e. farming might not be profitable at market rates but you get CAP payments so you do it anyway - to protect the domestic food production.

[Shrink Proof]

Whatever the rights and wrongs of this particular issue, I guess that farmers would get more public sympathy if they hadn't spent the last 20-30 years being perceived as having raised whingeing to the level of an art form.

Edited October 10, 2014 by Shrink Proof

[olliegog]

dairy farmers do not go out of business per se unless they go bankrupt or retire - they give up on the 'milk producing business' and go into beef production or grain or sheep or something else. The hand-wringing over 'dairy farmers leaving the milk business' is a mis-representation of the facts.

[Self Employed Youth]

Do they get CAP payments to make it worth their while - I thought that was the point of the CAP? i.e. farming might not be profitable at market rates but you get CAP payments so you do it anyway - to protect the domestic food production.

You get CAP payments for owning land, or by buying the rights to CAP payments as a financial instrument/investment.

The example in the bbc article was a tenant farmer. The will paying rent to the landowner, who will also be getting CAP payments, unless they have sold on the entitlement to CAP payments to somebody else..

Milk production is up massively. It's probably only the tenant farmers who are being driven out of business. And those who have not invested in new equipment.

[Northerner]

Farmers in debt and despair as dairy market collapses

British dairy farmers are threatening to take matters into their own hands as fears grow that volatile markets for their milk, butter and cheese products could jeopardise their livelihoods. Some larger dairy farmers are said to have incurred debts of more than £1m since milk prices first began to plummet in May.

Caught between a UK supermarket price war and a ban by Russia on EU produce, including dairy, which many fear could lead to a glut in Europe, dairy farmers are being asked to take action to help save their industry.

In an attempt to wrest control of the falling market, Farmers for Action, who staged the 2012 SOS Dairy demonstrations, has asked its members to support direct action to be taken by the end of this week. Within 24 hours of consulting its membership, the group received more than 500 "yes" votes, with farmers from around the country expressing grave concerns over the future of UK farming.

Welsh dairy farmer David Handley, chairman of Farmers for Action, said: "We're producing more and more milk on a daily basis and we've no market for it. We've now reached a point where we're about to fall off the edge of a cliff and the situation is dire.

"By the end of the year, we expect milk prices to fall by as much as 3p per litre, which will have a devastating effect on the whole industry, not only for dairy farmers but for the 25 to 30 areas of business that are directly associated."

According to Mr Handley, national dairy processors and unions such as the NFU are to blame for the impending crisis, after they instructed farmers to increase production levels in order to compete within the growing global market.

He said: "The NFU told us that Russia is going to be a panacea, China is going to be a panacea – that we have to produce every litre of milk we can supply because they are going to buy it. But, of course, it's all fallen through.

"We feel very let down by the unions. I know farmers who have racked up over £1m in debt since milk prices dropped in May."

The bleak economic outlook for farmers is being exacerbated by a Russian ban on EU produce in retaliation for Western financial sanctions taken against it for its involvement in Ukraine. President Vladimir Putin issued a "full embargo" on fresh produce, including meat, vegetables and dairy, prompting fears over what would happen to the large quantities of unwanted supply. Dairy produce is expected to be hit hardest and cheese is already being stockpiled in Europe.

The ban comes as UK supermarkets cut the price of milk in an attempt to keep or win back market share. As a result, the average price of a pint of milk is 50p, according to comparison site MySupermarket.co.uk.

Waitrose was the latest supermarket to reduce its milk from £1.39 to £1 for four litres, following Tesco, Sainsbury's and several other competitors.

The UK market is experiencing its highest surplus in milk since 2012, when farmers protesting against falling supermarket prices blockaded processing plants and threatened to tip milk down drains.

Phil Bicknell, chief economist for the NFU, said: "The UK dairy industry produces around 13 billion litres of milk per year, making it quite a small player in the global market. The bigger risk for us is what might happen to prices in the UK if products begin to stockpile. Trying to find a home for unwanted products can affect the supply and demand, which is fragile in agricultural markets. Recently, we have seen some shifting dynamics in the dairy market globally and that has put downward pressure on commodity prices.

"It is safe to say that we are worried about the supply and demand dynamic, and the Russian ban is something else to throw into that mix."

http://www.independent.co.uk/life-style/food-and-drink/news/farmers-in-debt-and-despair-as-dairy-market-collapses-9687838.html

[Liquid Goldfish]

It doesn't look so low historically

[Wurzel Of Highbridge]

Isn't a lot of this down to a good summer producing lost of grass and global milk prices being low.

New Zealand has a similar 'issue'

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11340496

Declining milk prices hit Landcorp profit forecast

The decline in milk prices has made its presence felt in Landcorp's operating earnings forecast for the 2014/15 June year.

The state-owned farm owner, which is also the country's biggest corporate farmer, said it now expects a profit of between $1 million and $6 million, down from its previous forecast of $8m to $12m.

"This reflects the recent downward revision in Fonterra's forecast milk payment to $5.30 per kg of milk solids (from $6.00) and the potential for further softening in milk payouts," Landcorp said in a statement.

Landcorp said its forecast assumed there would be be no adverse weather conditions, a deterioration in the currency market, or in market prices.

[olliegog]

David Handley was the leader of the fuel protests in 2000 - I believe

[Errol]

They need to form a milk farmers' union. Group together, and refuse to sell ANY milk unless a certain price threshold is agreed.

[GloomMonger]

My brother-in-law gave up his tenanted farm growing lettuce and celery last year. His profit for last year was £6k and he could only see the supermarkets squeezing him further. He is now employed 9-5 has no stress and is much happier. He might be one of the lucky ones. It sounds like many of you would rather we imported more food just so "millionaire" UK farmers don't get rich and food prices keep coming down.

[Neverwhere]

They need to form a milk farmers' union. Group together, and refuse to sell ANY milk unless a certain price threshold is agreed.

For that to work it would need to be an international, or at least pan-European, union movement.

Losing large swathes of British dairy herds is going to place us even more at the mercy of food imports

[Neverwhere]

My brother-in-law gave up his tenanted farm growing lettuce and celery last year. His profit for last year was £6k and he could only see the supermarkets squeezing him further. He is now employed 9-5 has no stress and is much happier. He might be one of the lucky ones. It sounds like many of you would rather we imported more food just so "millionaire" UK farmers don't get rich and food prices keep coming down.

I think people would have more money to spend on food, and would be more relaxed about paying a fair price to British farmers, if less of their take home pay was being eaten up by housing costs.