David Evans, the Managing Director of the Millbrook Dairy Company, says this. He thinks there is a growing gap between what UK buyers want to pay for cheese and what the world cheese market is willing to pay.
“It doesn’t take a genius to figure out that if cheese makers are offered more than £200 per tonne to export cheese, that’s where their cheese will go,” he said.
“Unfortunately, people who buy cheese in the UK’s biggest grocery stores don’t want to pay more for it. But buyers around the world are willing to pay, and the market is moving in that direction. We are importing less and exporting more, which is making it harder for the UK to meet its own needs.
He then said, “Right now, farming and the dairy industry are in one of the worst situations they have ever been in… And there doesn’t seem to be much hope at the end of a long tunnel.”
The sector is facing problems that start with the cost of production, which has gone up a lot in the last year.
“Everyone is being squeezed by the rising cost of living right now. “It’s the same in the dairy business,” said Evans.
“In the past, supply and demand were the most important factors. Farmers would work hard to get more money for their milk, which would push and encourage them to make more. But then, if production went up even more, there would be too much on the market, and the price would go back down.
“This time, no! Yes, farmers are getting paid more for milk—between 48p and 50p a litre compared to 30p a litre 12 months ago—but the cost of making milk is now at its highest level ever. Even though farmers are getting about 18p more per litre than they were a year ago, they are not better off. And because of this new thing, milk prices keep going up even though no more milk is being made. In fact, there is less milk than there was last year.
“The UK market didn’t expect buyers from around the world who saw the challenge ahead and were willing to pay more. Quite a bit more, as it turns out. Historic UK brands are shifting from selling in the UK to selling abroad, and who can blame them?
Millbrook Dairy thinks that if the UK wants to keep Cheddar cheese on its shelves, the retail buyers will have to pay more than world prices. This will stop a lot of people from selling their cheese abroad and get more people to sell in the UK.
The company, which is one of the most important exporters and importers of cheddar cheese in the UK, also brought up credit control as an unexpected problem in the supply chain. For businesses that sell cheese and buy cheese to put in other products, suddenly having to pay more than £115K for their usual load of 24mt of cheese means that many can no longer get the credit they need. It says that this will have an effect on popular pre-packaged goods as it keeps getting worse.
Evans came to this conclusion: “The market now has to think about other things. This summer has been one of the hottest on record, which means the D word. Extreme weather patterns in 2022 have caused a drought that has never happened before, and water has become very valuable.
“As we all know, drought affects the quality and quantity of crop and livestock food production at a time when prices are already through the roof. Most farmers have to feed their animals extra food because there isn’t enough grass, and the cost of this extra food is going up and up.
“No matter where we look, there’s a problem with supply. But on the other side of the coin, people always talk about how high prices are causing less demand. High dairy prices in the past have made less people want to buy it, but right now there is a problem with the supply around the world.
“Should the dairy industry start over? If only things were that simple. Consumers will see price hikes like they’ve never seen before, and if buyers don’t agree and step up to help fix the supply problems, shelves could be empty in a few months.
“One good thing is that maybe we’ll waste less if prices go up. We’ll have to see.”
Implications for NAM:
And not a word was said about plant-based.
Clearly, the government needs to give the dairy industry some serious thought…
Farmers aren’t able to think about how these unknowns will affect them in the medium and long term. This means that many farmers may change their plans, which could cause structural problems in the future.
Begs the question: What is the real plan for dairy in the UK?
So, going back to Implication 1…
