Friesians dairy cows

Source: Getty Images

A further 23% said they were ’unsure’ if their business would continue producing beyond this point, the NFU said

Almost a tenth of Britain’s dairy farmers expect they will end milk production within the next two years, new research by the NFU has revealed.

Amid growing concerns over soaring costs and plunging returns, a survey by the union of 590 UK dairy farmers between 5 July and 30 July found that 9% of producers believed they were likely to stop milk production by 2025, up from 7% last year.

A further 23% said they were “unsure” if their business would continue producing beyond this point, the NFU said, with 87% of dairy farmers expressing their concern about the impact of government regulation on their businesses.

Meanwhile, some 84% were concerned about feed prices, with 83% citing energy prices and 80% stating cashflow and profitability as key factors that could curtail milk supplies.

And 91% of dairy farmers said the main factor deterring them from increasing milk production was the scale of investment required for developments such as suitable slurry storage to ensure their farms were compliant with environmental regulations.

The survey comes less than a year after the UK average farmgate milk price hit a record 51.51p per litre in December.

But in the face of a slump in global commodity markets, prices have since fallen dramatically. Defra’s UK average for June stood at 36.48ppl, representing a 29.2% drop in just six months.

These falls have been translated into retail price cuts, with the mults initiating a raft of reductions across the dairy category, including liquid milk, in recent weeks. However, industry experts have warned the cost of production remains stubbornly high, at 40ppl or even higher, due to a lag in commodity price falls.

“It’s clear that significant inflationary pressures combined with below cost of production prices are continuing to put the resilience of British dairy farming businesses under threat,” said NFU dairy board chair Michael Oakes. “We are now facing a crisis of confidence among Britain’s dairy farmers.

“The results of this survey show that, now more than ever, we need resilient and collaborative dairy supply chains. It’s vital we reverse this trend of boom or bust and invest in our supply chains,” he added.

Oakes cited recently announced industry-wide regulation on contracts, expected to be introduced later this year following a supply chain review as a key tool in supporting “fairer, more transparent and accountable supply chains”.

But he warned regulation alone was “not a silver bullet”.

“With increasing global demand for British dairy, we know that the long-term future is bright for our sector,” he said. “To ensure we maximise this potential, it’s imperative that government continues to work with us to ensure we have the right environmental, regulatory and trade framework in place to support the production of high quality, nutritious and sustainable food.”