Many within the Welsh dairy sector have continued to operate under difficult and stressful financial circumstances since the overnight closure of most foodservice businesses under the UK government’s covid-19 lockdown.
The FUW has received a number of reports of farmers having to dump thousands of litres of milk as some processors refused to collect due to the loss in markets, whilst at the same time, spot milk markets became saturated and prices fell to as low as 7 pence per litre (ppl). It is reported that sales by liquid milk processors serving foodservice or wholesale markets have dropped by 50 to 60 percent, resulting in a supply and demand imbalance. This in turn has led to reductions in milk prices paid to farmers along with delayed payments and volume reductions from the dairy companies. Many are now receiving far less than the cost of production.
Alongside this, spring milk yields typically increase by around one to one and a half million litres of milk per week and this ‘spring flush’ adds to the oversupply of milk that would have gone to the foodservice markets which are currently closed down. The industry only has a limited ability to rebalance markets by producing storable products, such as milk powder, which can be sold at a later date due to the lack of spare drying capacity.
As a member of the Dairy Covid-19 Response Group the FUW, along with other organisations, sent a letter to DEFRA Secretary George Eustice calling for urgent Government action to support the dairy industry, by implementing measures such as a targeted grant scheme, a national production reduction scheme and market support such as Private Storage Aid.
The FUW has since welcomed moves by the UK Government to relax competition law which will allow for better collaboration between farmers and processors regarding milk volumes and processing capacity. The European Commission also announced plans to introduce Private Storage Aid for skimmed milk powder, butter and cheese for between two and five months from the beginning of May.
Defra has requested ‘accurate and credible supportive data’ that they can use to back up the industry’s claims for support. The Royal Association of British Dairy Farmers (RABDF) have worked with the farming unions and have produced a survey for dairy farmers to submit an online daily account of their losses. The FUW has sent this survey to its dairy farmer members and is now urging producers who have been affected by the covid pandemic to contribute.
With retail sales settling down, a continuation of lockdown measures for the foodservice sector and milk production continuing to increase, our dairy producers face significant challenges in the coming weeks.