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Global Milk Crisis Far From Over As It Brings 45% Pay Cut To England Dairies
January 29, 2016

England’s dairy farmers will see income fall by almost half this year, evidence that the global milk crisis is far from over.  Earnings will average 46,500 pounds ($66,500) per farm in England for the 2015-16 season that started in March, the Department for Environment, Food & Rural Affairs said in a report Thursday.
That figure, which includes European Union aid payments, is 45 percent below the prior season and the lowest in 9 years.

Dairy farmers across Europe are struggling with a collapse in prices after a global oversupply of milk was compounded by slowing demand in China and Russia’s ban on EU dairy in retaliation for sanctions. Protests over low prices broke out in France this week as more than 100 farmers, many of them livestock breeders, blocked roads and used tractors and burning tires to stop access to the port city La Rochelle.

“There’s too much milk in the world,” said Robbie Turner, head of European markets at Rice Dairy International, a risk management advisory firm in London. “There are people who are hard for cash,” and prices are likely to remain low for at least the next six months, he said.

On Thursday, Fonterra Cooperative Group Ltd., the world’s largest dairy exporter, cut its milk price forecast to a nine-year low. The Auckland-based company doesn’t expect a sharp recovery in Chinese demand any time soon.

Bankrupt Farmers
Low prices are “decimating” the U.K. dairy industry and a large number of farmers will go out of business, the National Farmers’ Union said this week. Average farm-gate milk prices in the U.K. from March to November were 20 percent lower than in 2014, according to Defra.

Farmer protests over low prices for milk, meat and vegetables erupted across Europe last summer, culminating in a rally in September that saw thousands of farmers gather with their tractors outside EU office buildings in Brussels. The turmoil receded after the EU allocated 500 million euros in emergency aid to the industry, of which U.K. farmers received an average of 1,800 pounds each, according to the NFU.

Milk prices have barely budged since last summer, averaging around 30.6 euro cents a kilogram in December, compared with a low of 29.7 cents in August, European Commission data show.

Even though prices have fallen, farmers are still churning out more milk. One incentive: the end of quotas last year that carried fines for over-production.

In England and Wales, milk output from March to November was 6 percent higher than a year earlier, according to Defra’s report. EU milk deliveries from January through November were 2.2 percent higher than the prior year, with the biggest increases coming from Ireland, the Netherlands and Belgium.

Farmers across England are feeling the pain of lower profit as a global oversupply in most crops drives prices lower. Grain growers will see a 24 percent drop in income this season. Earnings for pig producers are expected to plunge 46 percent from last year.

By: Bloomberg News


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