Tackling longstanding issues could make Brexit good for dairy farmers

A new report aimed at identifying a strategy for the UK dairy industry post-referendum has concluded the future is bright for dairy farmers in Brexit Britain – provided longstanding issues around productivity, marketing, the management of volatility and use of technology are addressed.

The report was presented at the RABDF’s policy and business conference in London today (18 October) by report author Mike Houghton, a partner with Andersons. Mr Houghton was awarded the inaugural Trehane Trust Fellowship last year to report on “Identifying a Strategy for the UK Dairy Industry Post-Referendum”, and undertook extensive research in the UK as well as the US and across the EU before reaching his conclusions.

At the conference, Mr Houghton argued that while prospects for lowland farms retaining subsidy look slim unless clear public benefit is being delivered, this isn’t necessarily a bad thing.

“Forty years of income support appears to have done little to improve productivity and efficiency in the dairy sector, and so a change to the support system should not automatically be seen as a negative,” he explained.

“But there are some stumbling blocks – how we manage volatility of price for one. Risk management tools are an obvious solution, particularly for heavily invested businesses which are viable at 26-28p per litre but would not survive for long at sub-20p. Some processors and independents are developing such tools, but banks and Government might also assist in this area.

“Much of the variation in price could also be ironed out through better communication, use of technology, and improved management of supply and demand. A quicker reaction to oversupply situations is in everyone’s interests; at present the industry appears to respond to reducing milk prices by producing more milk, at least in the short term,” he added.

“At farmgate level, this might be take the form of better A and B pricing models. At a global level it could mean setting up an ‘OMEC’ – the milk producing equivalent of OPEC – which manages fluctuations in price by balancing supply and demand.”

Mr Houghton believes many dairy farmers would benefit from a wider network of dairy monitor farms to help them improve their understanding of production economics. “For example, I estimate that achieving an average yield from forage of 3,000 litres per cow would save the industry over £60 million each year.  

“Marketing is also an important consideration. We have an extremely large domestic population on our doorstep with a range of chronic health problems that good nutrition and a healthy lifestyle can help to address. Dairy can be part of that solution, marketing on the back of what is, globally, a very good standard of animal welfare and food quality.”

Chair of the Trehane Trust, Professor Wynne Jones, has welcomed the report, saying Mr Houghton had delivered a paper of exceptional quality which would have shelf life long into the future.

“The dairy sector is looking for this kind of inspirational roadmap to help it think bigger. Brexit must be viewed for the opportunities it presents and we hope the key players will take note of this report and explore some of the innovative ideas contained within.”

Please click here to view the full report.