Why is the cost of milk so low currently?

07 Sep Why is the cost of milk so low currently?

There has been a lot of press recently regarding the low price of milk and an outpouring of support for dairy farmers across social media, campaigning for the price of milk to be raised to help the British milk industry survive. Only this week cows were marched into supermarkets across the UK in protest by irate farmers.  But what few people are addressing is why the cost of milk has dropped to such a low price.

Downward Pressure on Dairy Commodities

As the ability to gain greater milk yields has grown and milk production in the UK continues to be strong, the weak commodity market has meant that farmers need to produce even more milk in order to bring in the same amount of money as they did this time last year. Last year, milk production increased by 4% compared to the previous year, but prices had fallen by 19%.

It is thought that, according to the Department for Environment, Food & Rural Affairs, that the previous high commodity prices have caused production of milk to increase globally. This has then had a knock on effect on the price. The global market has been flooded with dairy products and so the prices have dropped sharply to reflect the overabundance of dairy commodities.

Farmgate Prices and Industry Conglomerates

Arla and First Milk, two of the biggest dairy farming conglomerates in the UK have both announced cuts to the price they pay per kg of milk in the last few months. This drop in price has reflected a drop in the farmgate pricefrom 24.99ppl to 23.81ppl. Farmgate prices were at a high in February 2014 in the UK and Northern Ireland with a price of 33.95ppl and the annual average price was 31.52ppl, however the decline of prices since then has meant that prices peaked earlier this year at 27.12ppl.

To put it into perspective, for farmers producing 1,000 litres of milk a day, in 2014 they would have earned £339.50 a day and in 2015 earned £271.20 for that same day’s work, a little over 20% decrease in their income.

Impact on Dairy Farming

This is yet another hardship for dairy farmers in the UK after the past 12 months where the unstable market has caused 450 dairy farmers to close down since June 2014. There are desperate calls from those in the dairy farming industry for government intervention to help the British milk industry and British dairy farmers survive this deepening crisis. There have also been calls for milk to be priced responsibly by milk buyers so that there is no longer “a race to the bottom” when it comes to pricing.

We work with a network of regional dairy wholesalers who adopt an ethical sourcing policy and pay a fair price for milk.  If you’d like us to quote for your dairy business please contact us.