Today brought the latest in a long line of farmgate milk price reductions from major dairy processors, with both Dairy Crest and Müller announcing further cuts from 1 November.
In a far cry from the salad days of the spring – when most farmers were being paid around the 35 pence per litre bracket - Dairy Crest will reduce its standard liquid price by 1.3ppl from the start of November, meaning it will pay farmers on liquid and Davidstow contracts 27.04ppl and 29.04ppl respectively.
Müller’s standard farmgate milk price will drop by 1.9ppl on the same day to 27.1ppl.
At least these farmers have a month’s notice. Those supplying Arla found out last week – in line with the voluntary industry code that means co-ops can give as little as three days’ notice of price changes – that it would be reducing its price by 1.67ppl to 28.55ppl from 29 September.
Tesco has also cut the price it pays farmers in its sustainable dairy group from 34.2ppl to 32.01ppl from 1 November, and others, including First Milk (currently paying 26.1ppl for manufacturing and 25.1ppl for liquid) could be set to follow.
These cuts are a symptom of the volatility of the global dairy market, say the processors.
The market has become even more unstable in the wake of a massive reduction in Chinese demand and the Russian trade embargo, while New Zealand-based dairy giant Fonterra downgraded its forecast for 2014-15 milk prices last week by a whopping 37%.
And the ongoing quest by the supermarkets to offer four pints for a quid isn’t helping: one industry insider told me it has devalued the commodity to such an extent that it will be very difficult to turn things round in the future.
Meanwhile, protest group Farmers For Action (FFA) has told members to “leave a free date in your calendar for the next 10 days”, hinting we could see a repeat of 2012’s SOS Dairy protests. They’re even working on a new SOS Dairy song!
So what’s next?
The processors say they will robustly defend their interests in the event of direct action, and the general consensus is we will see even deeper cuts before the market begins to plateau towards the end of this year and into 2015.
Some in the industry have no sympathy for farmers who were making hay (pardon the pun) a year ago when farmgate prices were significantly higher, and DairyCo data states production levels are also up almost 10% year-on-year, despite the slump in demand.
FFA responded this week by saying “why oh why are you paying farmers volume bonus incentives if you can’t handle the milk?”, and as I wrote this blog, they announced proposals for a voluntary dairy quota to offer farmers some “self-control in respect of milk supply”.
It seems a remarkably non-militant move on the part of the so-called militants, and it remains to be seen whether the coming weeks will bring the dairy industry “peace in our time”, or even more turmoil.