BBC BLOGS - West Country Cash
« Previous | Main | Next »

Can you make money out of milk?

Dave Harvey | 10:13 UK time, Wednesday, 26 August 2009

For as long as I can remember, dairy farmers have been in crisis. There was a brief blip last year when the Chinese got so rich they started eating ice cream, but now the recession has largely killed that and things are back to normal.

"We're losing six farms a week, and it's a disgrace."

Cow grazing

Derek Mead is a well known dairyman round here - and known for being a likeable "Farmer Grump". He thinks the constant exodus is appalling. Latest figures from the industry body DairyCo show 94 farms went out of production round here last year. (If you like milk stats, they're all here.)

So how many are left? Across the west country - not counting Devon and Cornwall - there were 1,716 at the last count. Which suggests you can make money out of milk, somehow.

Take Geoff Bowles, near Frome. When the G20 leaders gathered it was his milk, cream and butter on the table. It also graces Harvey Nichols, Harrods, all the posh shops. Ten years ago, his family dairy farm was struggling, until someone told him this.

"Get big, get niche or get out." It's an axiom that served Geoff well. He sold his cows, bought some prime Jersey cattle and built a dairy. He makes his own clotted cream, cream and butter, and sells direct. I made a film about him - you can watch here.

All over the west country you find guys bottling their own with cute labels, churning ice cream, making yoghurt. But with nearly 2,000 dairy farms, they can't all do that. We'd never stop eating ice cream, and we'd run out of milk for our tea.

"It's a tiny minority, maybe 10%," David Cotton tells me. David farms near Glastonbury and knows milk well. "Most of us milk cows, fill tankers, send it off to be made into cheese or butter or sold as milk. I milk 8,000 litres a day here. Imagine if I turned up at a Farmers' Market with that lot to sell!"

So most farmers, it seems, are selling into the bulk markets for cheese, butter and dried powder, or into what they call, rather oddly it seems, the "liquid milk" market.

And these markets, like any others, go up and down. Milk costs us about 60p a litre in the shops, of which the guy who milked the cow gets about 22.5p. (Stat courtesy of Dairyco again.) When that price paid to the farmer goes down by 1p, they lose between £5,000 and £10,000 depending on the size of the herd.

Many farms only make £10,000 a year profit, so when I tell you the price has dropped 2.5p in 2009, you can do the maths.

But here's the thing. Supermarkets are no longer the villains. Mention Tesco or Asda on a family farm and you expect to get your ear chewed off. But not any more. Supermarkets have done deals with "partner farms" to guarantee a supply of fresh milk. In return, the farmers get a price fixed at the cost of production, plus a margin. There's a complicated formula and plenty of hoops to jump through, but they mostly seem happy with it.

So who is going bust then? From what I've heard, it's three types. Dairymen approaching retirement in their 50s struggle to find someone to take the farm on. Often their kids want nothing to do with it, and few farms are sold outright. Technically then, they haven't actually gone bust - just sold up.

The second group are the farmers caught in the collapse of Dairy Farmers of Britain, the Uk's biggest co-op, which went bust in June. Some have found a new contract, but hundreds are still being paid just 10 a litre by the receivers. Here's a good report on what that feels like.

And the third group who are up against it? The guys in the middle, who haven't gone niche, haven't done a deal with the big boys, haven't got a field to sell to developers. Their milk goes into the huge world lake for cheese, butter and that dried powder the global food industry puts into the oddest things. (Ham with milk in it? Read the label...) While the price is as low as it is - just 22p a litre - hundreds more of these farms will slowly die out.

Will that matter? Should we just let them go to the wall? If dairy herds get bigger and more commercial, cows spend more time indoors and farm buildings are more steel than cotswold limestone, would you care?

If you're in milk, or you just like eating or drinking the stuff, hit that comment button now.

Comments

  • Comment number 1.

    ther has to be some common sense here why is Mr Mead milking cows from a country where it takes 38p to make a profit? and the cow bred from canada will never see or Know how to use GRASS!!! In this country we have a wonderfully cheap product in grass that fewer and fewer cows are eating crazy!! We have breed a cow in this country that is designed to live in sheds and have the food bought to them at a lot of extra costs.There are farmers with grazing cows making a good living at current milk prices,they have tried to explain how they do it to the rest of the industry. they were given lots of reasons why it wouldn't work and told to keep quiet!So they have and nearly all are still milking with many expanding and taking on other farms a sure sign of success.
    Unless the government brings in a supermarket ombusman the milk price wil be what it will be so dairy farmers have three choices 1change to face the challenge 2 get out or 3 keep on moaning the choice is yours Mr Mead!!!!!!!!!!

  • Comment number 2.

    im just a normal parent whos children love milk and im willing to pay more for the milk we buy to retain our farmers. they do not get paid enough for the milk as it is and supermarkets are the main reason for this!

  • Comment number 3.

    I suspect that lazyfarmer is not a dairy farmer. Does he really think that by changing the breed of cow and feeding them grass it is possible to shave 16p/litre off the costs of production? Does he really think that farmers are using the profits from producing milk at 22p/litre to buy out their neighbours? Farmers who are expanding their dairy enterprises are mostly financing the expansion with cash from selling off land for development, or gambling that prices will improve to pay back borrowing. Apart from the simple economics, the farmer who persists in dairying has to face the possibility (a very strong one in some areas) of running the farm under movement restrictions imposed because of TB reactors among the herd - a heartbreaking and horrendously expensive job. See the report of the Farm Crisis Network. Also looming large on many farms is the prospect of severe restrictions on output or large investment in facilities to meet the latest Nitrate Vulnerable Zone regulations. Farmers are not critising the Supermarkets. Would you bite the hand that throws you a few crumbs? I left dairying 3 years ago and I view those who soldier on with a mixture of sympathy and admiration.

  • Comment number 4.

    Hi there everyone, Derek Mead here, just some thoughts and comments regarding todays programme and the blogs. Dave Harvey, no I dont bleed milk, just blood, I also do sweat and tears and started with nothing, worked my proverbial b-----ks off and made things work for me. I agree with Mr Cotton that costs and overheads in business have to be monitored and kept under control, basic business principles, but where I feel frustrated as a business man is that we have a marvelous product in milk, with a 60million client base in the UK. Milk is very nutritious in every day diets and also research supports that milk is hugely beneficial combatting osteoporous, breast cancer and heart disease. Considering that the supermarkets spend billions of pounds on advertising and we the milk producers have not had a real marketing arm since the demise of the milk marketing board in the mid 90's the surprise is that liquid milk sales have stood the test of time on the shop shelves, this being due to the general public knowing that it is a good, nutritious balanced drink. I quite agree with kinkad33e that she would not mind paying more for milk as long as it goes to retain the dairy farmers. She and others like her would not have to pay extra provided that the profit margins from milk production were more fairly distributed. Currently the supermarkets are retaining the farmers profits from milk production.

    The Lazyfarmer seems to think that 38p received in canada per litre of milk is too generous a profit to the dairy farmer. This profit is regulated by the Ontario Milk Board where profitability is compared and distributed fairly with profit being available for all concerned and still giving a keen price in the supermarkets, which is exactly what our supermarkets should be doing here.

    The Lazyfarmer does not seem to understand the markets for milk. There are two distinct markets being Liquid( Milk, yoghurts, cream) which has to be produced 365 days of the year, the demand in this country is 7.5 billion litres each year which is well over 50% of the milk produced in the UK and the second market being the cheese and butter market which has a requirement of 3-4 billion litres each year. We are in the UK currently only 83% self sufficient which means to say that losing dairy farmers will have a significant impact on the consumer in the long term.

    As people will be able to see if they travel down the M5 motorway, Robert Wiseman Dairies have recently opened the biggest liquid milk factory in Europe at Bridgwater, which employs 400 people . Yeo Valley Yoghurts employ nearly 1,000 people and there are many other smaller outputs,Dairycrest, Milklink and smaller cheese producers employing thousands of people in the south west so where would these people be without local milk production. This is a major issues for the whole of the rural economy for the South West. I cannot leave this blog without a little 'dig' at the Lazyfarmer about my Holstein cows. I personally think their breed is irrelevant (Fresians or Holsteins), you only have one type of black and white cows and that is 'good ones'.

    I would really be interested from anyone out there who knows of any company who can be successful working for little or no profit as Mr Cotton suggests.

  • Comment number 5.

    hi stroppypeasant i am a dairy farmer and my cost of production is below 18p and could be taken lower if required our own expansion has been done through reinvesting our own profits, traveling to to see how others do it better and by sharing good and bad practise with others in my discussion group. i admit i am lucky not to have TB or be in an NVZ but otherwise i am in the same position as an any other dairy farmer. we just chose a different route-one based on profit not output.

    MR mead seems to be suggesting that his is the only way to produce milk sadly it is not their is no reason why half the herds in the southwest couldnt be calved in the spring and the other half in the autumn this would meet his concerns over level supply and at the same time vastly reduce the cost of production on 90% of farms increase the efficiency of milk transport and leave everyone with a profit the only real challenge then mr mead would be to get your cows to calf once a year Hmmmm.

  • Comment number 6.

    Mr. Harvey:

    Yes, we can make money out of milk......

    =Dennis Junior=

 

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.