A pivotal year ahead for Scottish dairy

This is a pivotal year for Scottish dairy writes NFU Scotland Milk Committee Chair Gary Mitchell.

Milk prices must continue at record levels and keep running ahead of unprecedented input costs if the latest dairy herd figures for Scotland are to be maintained in 2023.

He writes: “This milk year has been a challenge for all, be it input costs, weather, labour shortages or uncertainty around milk price.  For some time, all eyes have been on the variables that will face dairy farmers in Scotland in the Autumn and Winter.  While milk prices are the highest seen on record, they are only just keeping pace with production costs.

“As I write this, AHDB reports that GB milk production is forecast to finish the 2022/23 season between 1% and 3.8% lower year on year.  They do stipulate that this will depend on the severity of cash flow pressures on farm, but it is widely felt that the current situation will discourage most farms from pursuing higher yields.

“This is set against the backdrop of the recent figures released by the Scottish Dairy Cattle Association, who maintain the data base of Scottish dairy herds.  Their comprehensive data is produced twice a year.  Its latest report highlighted that Scotland has lost a net total of 13 dairy herds in the six months to 1 July 2022 compared with 11 for the whole of 2021. The total number of milking herds is now 819, with an average herd size of 218 cows, up 2 cows from January 2022. Over the same period, the number of dairy cows in Scotland fell to 178,464, down by 897 from 1 January 2022.

The trend of fewer herds in Scotland has been ongoing for some time, and it will be fascinating to see the data the Association produces in January 2023.

Inflation in agriculture has soared to over 30%, the highest level for decades.  Not only are many dairy farmers receiving the highest milk price they ever seen, but they also have a long list of costs and invoices to match.  Feed, fuel, and fertiliser prices have become the industry mantra and added to that list are the issues surrounding labour.  Not only has inflation pushed wages up, but training and retention also requires investment.

For too long, milk price had been in a period of stagnation, but 2022 has seen monthly increases across the board, increases that are urgently required.   However, I do have concerns about the disparity of pricing, not only the percentage levels between the “haves and the haves nots” but the timing of milk price announcements and the subsequent implementation when made.  

Milk price at retail level is often used by the media as a barometer of consumer behaviour, but what is often forgotten is that we are starting from a very low base, where historically milk has been sold as a loss leader. This needs to change, although price elasticity, the wider economic factors and the changing habits of consumers cannot be ignored.  

While farmers are not directly responsible for setting the shelf price at retail level, our hands are not completely tied.  The farming unions are working tirelessly on this, making it very clear to politicians both north and south of the border that fairness across the whole supply chain is a priority.  We need to manage the pressure that inflation brings and an assurance that farmers are being supported during this challenging time.

In an article written by myself in November 2021, I stated that for too long, 30 pence per litre had been seen as the great target for dairy farmers. And at that time, I suggested that 40ppl was to be the new 30ppl.  A statement that raised an eyebrow amongst many.  Well, who would have thought how quickly outdated that figure now looks as prices move towards 50p?  That momentum must be maintained if the size and scale of Scotland’s dairy herd is to be preserved.

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