John Craven warned this week of a “long drawn-out death” for UK dairy. But Nocton Dairies is not alone in being more optimistic. Michael Barker reports

If you believe everything you see and hear these days, you could be forgiven for thinking the British milk sector is on its knees. On this week's Countryfile, John Craven asked whether we were seeing the "long drawn-out death of the UK dairy industry", and posited that we could be importing half of all our fresh milk by 2030. With nine dairy farmers a week going out of business, the only way to survive, Craven contended, was to go large scale or small and niche.

Yet delve a little deeper and you'll find there's more than a whiff of optimism in the dairy industry. This week's announcement that Nocton Dairies is to establish what will be the UK's largest dairy farm (p34), with 8,000 cows producing 250,000 litres of milk per day, is being viewed as a real statement that the industry is in ruder health than some might think.

"More confidence"
"There is more confidence compared to where we were five years ago," says Arthur Reeves, Dairy Crest's external affairs director. "We are in a much better way. One or two of the weaker processors are out of the way now and there's a pretty stable market. The Nocton plan is enormous and it makes a clear statement."

The £50m initiative, spearheaded by two dairy farming veterans in Peter Willes and David Barnes, reflects growing optimism that the returns will eventually justify the investment. And they are by no means the only ones investing big. In November Arla announced its intention to build an eye-watering one billion litre dairy in London at a probable cost of hundreds of millions of pounds. Meanwhile, Dairy Crest said this month it would be pumping £75m into efficiency improvements, faster equipment and better infrastructure in its dairies division; Medina Dairy plans to become a major milk player by doubling its sales to £400m within five years; and Robert Wiseman says it has spent no less than £448m on its facilities since its flotation in 1994.

Hardly the kind of numbers you associate with a dying industry.

"There's a lot of investment going on by ourselves and others, and we've done that on the basis that fresh liquid milk has a great future in Britain," says Graeme Jack, communications director at Robert Wiseman.

"Segregated supply chains, with long-term commitments by the likes of Tesco and Sainsbury's, are a great signal to the dairy farmer."

Indeed, dedicated supermarket supply pools are widely cited as having brought more clarity and confidence to a once-chaotic industry, with Tesco's transparent cost tracker held up as an example of how retailers can help make farming profitable. Most of the supermarkets have set up their own dedicated arrangements, although industry sources say that Morrisons and The Co-operative Group still have some way to go.

Confidence is also boosted by strong sales figures, with liquid milk volume sales up 1% in the last year and further growth expected to come following the April launch of the Milk Marketing Forum's £7.5m Make Mine Milk campaign.

Certainly Dairy UK has been upbeat for some time. "Sustained investment on farms, millions being poured into state of the art processing sites to add value to products and a return to global growth are key to future prosperity," says director general Jim Begg. "We're seeing all this and more at present."

That isn't to say there aren't still challenges. Farmers and processors are waiting with bated breath for a predicted increase in the Cheddar price that will bring relief after months of low pricing, while calls for a dedicated supply arrangement in cheese to mirror those in milk continue to fall on deaf ears.

Stable prices
Farmers at the bottom of the milk price table are still earning as much as seven pence per litre less than those at the top, so dairy farming is by no means profitable for all. But at least dairy prices have been stable over the last few months following a period of intense volatility.

Craven is right to point out that dairy farmers are still going out of business, but many of these including the one interviewed on his programme are in less favourable locations or are ageing farmers with no succession plan.

Many analysts believe the 40-year decline in domestic milk production is about to come to an end. Next week DairyCo will unveil its much anticipated state-of-the-nation report into the health of Britain's top dairy companies, and for once, the industry is optimistic it will be declared fighting fit.