East Anglia: Dairy farmer calculates losses to sector

East Anglian producer David Herdman has calculated that an average farmer will lose �53,000 on a standard contract.

As chairman of Dairy Crest Direct, his 1,280 members supply 1.6 billion litres a year and will be paid 24.92p per litre from August or 4.41p below break-even.

Cambridgeshire farmer Mr Herdman, of Great Staughton, near St Neots, said: “This latest 1.65p per litre milk price reduction in addition to the 2p per litre cut in May will deliver a completely unsustainable milk price to our members.

“Unless some economic reality can return to margins in the liquid market place, then the prospects for future milk production from farmers exposed to this sector must be called into significant doubt.”

He said that all recognised cost of milk production models highlighted the impact of rising costs, now about 29p or 30p per litre. With falling prices, the industry body, DairyCo has reported a fall of one million litres each day in milk production – even before the latest cuts were announced.

Mr Herdman added: “It is clearly unacceptable to expect our members on standard contracts to sell milk at a 4.41p per litre loss to the break-even position.”

Farming minister and south-east Cambridgeshire MP Jim Paice said earlier this week: “These further price cuts are disappointing as they appear to fly in the face of rising prices in global markets, and they show how important it is for the industry as a whole to agree on a voluntary code of practice on contracts as soon as possible.

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“Time after time I’ve been saying how crucial it is for farmers and processors to rebuild trust and work together to take advantage of the huge future opportunities for the British dairy industry.”

Dairy Crest has said no further price cuts will be made this year and that it wanted to increase the price again as soon as market conditions allowed. In April, it closed two liquid dairies including Fenstanton near St Ives in Cambridgeshire.

Group milk procurement director Mike Sheldon said: “We have maintained our liquid milk price for three months while we have worked hard to achieve greater operational efficiencies and selling price increases.

“We have agreed that we will not reduce milk prices again this year,” he added.

An unprecedented meeting of farming unions has called for the immediate reversal of price cuts. Peter Kendall, president of the NFU, who chaired the meeting of all UK farming unions, called for all cuts imposed on farmers since April 1 to be restored by August 1.

It is holding a crisis summit in London on Wednesday to leave retailers, MPs, processors and the public in no doubt about the scale of the problem.

A joint statement said: “The catastrophic cuts will drive farmers out of the dairy industry and we are united in our demand for an immediate reversal of recent and planned cuts. There has been an unprecedented outcry of anger and frustration among farmers.

“Farmers have told us they will do whatever it takes to stand up against these cuts – Wednesday’s summit gives us that chance.

“There is a window of opportunity between now and August 1 to progress a robust voluntary code of practice, however, we will also be exploring a regulatory solution from government.”

Standard August farm gate milk price – 24.92p per litre.

Farmer’s share – 14.16p pint.

Kite Consulting’s break-even – 29.33p litre.

Sainsbury cost tracker pays 30.56p litre.

Tesco cost tracker pays 29.06p litre.

Dairy Crest standard price – 24.92p.

Total producers to May:

England – 8,820 herds.

Wales – 1,904 herds.

East Anglia – 222 herds.

Norfolk – 57 herds.

Suffolk – 30 herds.

Cambridgeshire – seven herds.