Dairy farmers having to grit their teeth and just hang on

A funny old game, farming. According to a recent survey 86% of farmers taking part and representing all types of farming said they made a profit in their last complete financial year.

Dairy farms were most successful with 93% reporting profits. But looking ahead only 14% of those taking part thought they would show a profit in their present financial year and it’s a safe bet that few dairy farmers would be in that category.

Income volatility for the self-employed is not confined to farming, of course. Many small businesses rural and urban could tell a similar story over the years. But dairy farming alone is an example of how income can fluctuate wildly within a few months for reasons that have little to do with how well the farmer and staff do their job.

Not much more than a year ago on-farm milk prices in general were more than 30p a litre. The general return now is about 10p a litre lower and a section of farming in disarray is going through one of those ‘who can we blame?’ phases. The short answer, unwelcome to many dairy farmers, is that they have themselves to blame for responding to high prices by producing too much milk and having to watch returns plummet.

Poor management by some of the dairy farming co-operatives made the situation worse. With big investment in cows, buildings and equipment getting out of milk production is not an easy option and in spite of the headlines the reaction of most dairy farmers is to grit their teeth and hang on until prices improve. It should also be noted that a fair percentage have direct contracts with supermarkets that are still providing reasonable returns.

But the future for dairy farming in general over the next year or two at least looks rocky. As does that for most other types of farming because of what the Bank of Scotland’s chief economist Donald MacRae calls in his report on the survey ‘a combination of depressed prices, a long introduction of a new support framework and a review of landlord tenant relations (in Scotland) has sent optimism among farmers to its lowest level in 12 years.’

That includes their view of the latest version of the European Union’s common agricultural policy (CAP) and the way in which subsidy eligibility will be judged and payments made. Reaction to it, said Professor MacRae, is ‘universally negative’ with 73% of farmers saying their business would be significantly worse off. It is also forcing farmers to make stocking and cropping changes. Small wonder that against this background the farmers’ union for England and Wales claims that Britain’s self-sufficiency in food has slumped from 78% 30 years ago to 60% now. The NFU warn that slump will continue because of the government’s ‘dangerous complacency’ to not much more than 50% within another 30 years.