The UK dairy crisis deepens as Cathedral City maker axes contracts. One farm closes daily, experts warn. Saputo Dairy UK terminates 13 South West farmers’ agreements, risking 20 million litres of milk. Industry faces consolidation, pricing uncertainty, and market pressures. What’s next for British dairy?

Summary:

The UK dairy industry is in turmoil, marked by Saputo Dairy UK’s decision to terminate contracts with 13 farmers, placing 20 million liters of milk production at risk. This situation highlights the broader challenges, such as falling farm numbers, pricing issues, and market pressures threatening the industry’s stability. Despite these hurdles, there is optimism. The Agriculture and Horticulture Development Board (AHDB) predicts a 1.1% rise in milk production by 2025, primarily from better weather and rising milk prices. Still, with one farm closing daily, the industry must tackle global risks, shifting consumer trends, and reduced government support. There is an urgent call for transparent supply chains and supportive policies to ensure the future of British dairy farming.

Key Takeaways:

• Saputo Dairy UK’s termination of contracts highlights the vulnerability of farmers who rely on single buyers for their produce.
• Consolidation within the dairy sector increases financial instability for smaller farms.
• Farmers are often grappling with being paid below their cost of production, exacerbating financial pressures.
• Despite current challenges, there are forecasts of potential growth in UK milk production in 2025.
• Consumer demand trends fluctuate, with growth in cheese and yogurt contrasting with milk and butter consumption declines.
• Uncertainty about the longevity of dairy farming is rising among British farmers, with many uncertain about continuing beyond 2025.
• There is a pressing need to reassess the dairy supply chain to support small producers better and ensure sustainability.
• Calls are being made for more resilient and transparent supply chains to tackle the industry’s crisis of confidence. ‘

The UK dairy industry faces a severe crisis, with experts warning that one farm is going out of business daily. Saputo Dairy UK, the producer of Cathedral City Cheese, recently decided to terminate contracts with 13 farmers in the southwest region, highlighting this alarming trend. 

Industry in Turmoil 

Saputo Dairy UK, which also produces Clover and Utterly Butterly spreads, has ended agreements with 13 farmers who supplied the company with 20 million litres of milk annually. This move has sent shockwaves through the industry, potentially leaving these farmers without a buyer for their milk and at risk of financial ruin if they cannot secure new contracts within the next 12 months. 

“We are pretty upset at the decision to notify some of our members. We will support those members in any way we can,” Richard Thomas, chairman of Davidstow Creamery Direct (DCD), expressed deep concern about the impact on the affected farmers.

Broader Industry Challenges 

This latest development is part of a more significant trend of consolidation and challenges facing the UK dairy sector: 

• Declining Farm Numbers: As of April 2024, there were around 7,130 dairy farmers in Britain. The country loses about 440 dairy farmers annually, a decrease of nearly 5.8% annually.
• Pricing Uncertainty: Many farmers are being paid below the cost of production, leading to financial instability.
• Market Pressures: The industry grapples with processor price manipulation and sudden contract cancellations.

Industry Outlook 

Despite these challenges, the UK dairy industry shows signs of resilience. The Agriculture and Horticulture Development Board (AHDB) forecasts a 1.1% growth in British milk production for 2025. This growth comes after a difficult start to the 2024/25 milk year, which saw sluggish growth due to wet weather and lower prices. 

Susie Stannard, AHDB senior analyst for dairy, notes, “While signs of recovery are visible, the sector must remain vigilant against global risks, including unstable commodity prices and potential disease outbreaks.”

Market Dynamics 

Recent data from the AHDB shows significant growth in milk production: 

• GB milk deliveries through Q4 2024 grew by 3.5% compared to the same quarter in 2023.
• October 2024 saw a 2.7% increase, November 4.5%, and December 3.3%.
• The Defra UK milk volume for October 2024 was 1,217 million litres, 2.8% up on October 2023.

The milk price has improved, with the Defra farm-gate milk price for October 2024 at 45.17 pence per litre, up 2 pence from the previous month. 

Consumer Trends 

Consumer demand for dairy products has been mixed: 

• Milk volumes declined by 1.9% year-on-year
• Cow’s cheese saw volume growth of 4.5%
• Yogurt volumes increased by 6.3%
• Butter volumes declined by 3.4%
• Cream volumes grew by 2.5%

Farmer Uncertainty 

A recent NFU survey of almost 600 dairy farmers revealed growing uncertainty in the sector: 

• 24% of British dairy farmers are unsure whether their business will continue producing milk beyond 2025.
• 9% believe they are likely to stop producing milk by 2025, up from 7% the previous year.

Looking Ahead 

The UK dairy industry faces a challenging future, with farmers caught between rising costs, market uncertainties, and the consolidation efforts of major processors. As the sector evolves, smaller producers’ ability to adapt and find new markets will be crucial for survival. 

The situation underscores the need for a comprehensive review of the dairy supply chain and potential policy interventions to support British dairy farmers during this period of significant change. NFU dairy board chairman Michael Oakes has called for resilient and collaborative dairy supply chains to address the ‘crisis of confidence’ among producers. 

As the industry navigates these turbulent times, the focus will be on creating fairer, more transparent, and accountable supply chains to ensure the long-term sustainability of British dairy farming. With factors such as disease control and policy changes influencing the market, the UK dairy industry approaches 2025 with cautious optimism. 

Learn more:

• Australia’s Dairy Farmers Struggle as Major Processors Slash Milk Prices by 15%
• Ireland’s Dairy Farmers Battle Persistent Rain
• Australian Dairy Industry Faces Uncertainty with Fonterra’s Exit and Falling Farm Numbers

Join the Revolution!

Bullvine Daily is your essential e-zine for staying ahead in the dairy industry. With over 30,000 subscribers, we bring you the week’s top news, helping you manage tasks efficiently. Stay informed about milk production, tech adoption, and more, so you can concentrate on your dairy operations.