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The Dairy Industry Today

The Dairy Industry Today. Nick Everington Chief Executive Royal Association of British Dairy Farmers (RABDF). Tel 0845 458 2711 nickeverington@rabdf.co.uk www.rabdf.co.uk. The Changing Face of UK Dairy Farming. * Projected figures from “The Future of UK Dairy Farming”

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The Dairy Industry Today

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  1. The Dairy Industry Today Nick Everington Chief Executive Royal Association of British Dairy Farmers (RABDF) Tel 0845 458 2711 nickeverington@rabdf.co.uk www.rabdf.co.uk

  2. The Changing Face of UK Dairy Farming *Projected figures from “The Future of UK Dairy Farming” Report– defra 2004 Note: Current herd size in EU-15 is 37, in New Zealand it is 251!

  3. UK Dairy Production Holdings *Latest Figure available 2004 **Projected figures from “The Future of UK Dairy Farming” Report – defra 2004

  4. Utilisation of Milk by UK Dairies Approximately 50% of the 14bn litres of milk produced on UK dairy farms goes in to the liquid market a decline of 3% since 1995.The rest is used in processing for which the number outlets for farmers to sell milk to has declined. Eg 8 companies account for 74% of cheese production.

  5. UK Dairy Industry - Past the Farm Gate(2004) • 130 Milk purchasers and over 100 processors. • 5 Largest purchasers from producers are: • First Milk • Milk Link • Dairy Farmers of Britain • UDF (NI) • Dairy Crest • About 86% liquid milk sold through retailers (55% in 1995). • Liquid milk consumption - 2.18 litres/head per week (3.84 pints) in 2002, 2.7 litres in the 1970’s but 2004/5 saw the first increase in consumption for 30 years. • Sales of branded milks and cheeses showing significant growth.

  6. Opportunities to Add Value in the Dairy Market • Milk • Specially selected, Designer ie Omega 3, Breakfast, Night Time , Breed Specific, Regional • Organic Milk • Demand is growing by 25% per year. • Still only represents just one in every 30 pints sold. • Dairy Beverages • UK lags behind other markets in the development of flavoured milk, probiotics etc • The market is now growing very quickly. Total value £300m in 2004 - up 39% on previous year. • Sales of yoghurt drinks grew 5 x faster than flavoured milk sales in 2004. • A total of 8.4m households bought yoghurt drinks in 2004, 40% more than in 2003. • However, dairy beverage sales in UK accounted for less than 1% of total non-alcoholic sales by volume. Compared with 7.1% in Finland, 5.8% in Sweden 4.5% in Denmark 2.5% in The Netherlands • Yoghurt • Use relatively low volumes of milk but some important UK produced brands ie Mueller • Cheese • 400 + UK varieties. Regional Cheeses being more actively marketed by supermarkets • Large Potential Market - Imports account for approx 50% • Ice Cream • Producer Processor potential for high margins but sales limited to local market without good distribution network

  7. Consumption of Dairy Products in EU

  8. EU Milk Prices • In 2004/2005 - UK still at the bottom of league table. • Seventh year in succession • Average UK milk price was 10% below EU average. In previous years it had been 16% below average. • 37% gap between UK at the bottom and Italy who receive a milk price of 35.8 euros/100kg compared to UK at 25.9

  9. Why has the UK a low Farm Gate Milk Price? 2005 / 2006 Milk Year Farm Gate Milk Price = 18.73ppl p/litre • Weak selling systems - poor industry structure. • Bad forward contracts. • Excess profits up the dairy food chain • Too much spring milk - dramatic move to spring calving - seasonality - is this what the market needs? • Currency Effect - £ / Euro relationship - IMPE not working Source Defra

  10. Supermarket Liquid Milk Margins Adapted from MDC “Dairy Supply Chain Margins” Report, September 2005)

  11. Net Dairy Farm Incomes – Source: defra • Incomes rose by 10% in 05/06 but SPS payments are included by defra (account for majority of income ) despite the fact payments are supposed to be decoupled from production • Modulation & financial discipline could halve SPS payments over next 6 years • Figures exclude: • Interest charges = 0.5ppl = £5,000 • Unpaid family labour = 1ppl = £10,000 • Cost of new waste regulations average £600 per farm • Increased slurry storage costs resulting from NVZ measures • Allowance for reinvestment essential for a sustainable dairy industry * Provisional Figure

  12. UK Dairy Farming - Strategies For Survival • Farm businesses either need to get bigger or collaborate in sharing, buying or marketing • Rise above commodity price by offering substantial product attributes, backed by strong branding • Be dedicated to certain customers or markets • Add value on the farm • Operational excellence - best practice • Look at diversification possibilities (alternative uses for buildings etc)

  13. Implications for Careers in the Dairy Food Chain • Fewer sons and daughters are following their parents in to dairy farming creating opportunities for those who wish to farm eg share farming , partnerships etc • Shortage of skilled herdspersons despite good pay, conditions and benefits of working in the countryside • Successful dairy farms in the future will need a better qualified workforce (Today 50% have degrees or diplomas) • The industry needs more Dairy Service Engineers, Machinery Fitters, Large Animal Vets, Herd Managers, Good Technical People in the Supply and Processing Industries.

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