Undoubtedly, some time during this month’s election campaign someone will ask one of the party leaders the infamous question, “What’s the price of a pint of milk?” It’s a convenient test to see if our politicians are in touch with the ‘real world’. Perhaps it has become too easy a question now that every politician has learnt that, if they pop down the road to Tesco, a pint of semi-skimmed milk will cost around 50p. The problem is that we rarely ask how much the dairy farmers get paid for it.
In the year from January, the average price for milk on the farm gate fell from 34p to 20p a litre. Facing such a dramatic fall in income, UK dairy farmers are really struggling. As of today, the EU dairy quota system that has been in place since 1984 no longer exists. The planners of the Common Agricultural Policy (CAP) see this change as a great opportunity for the development of a more market-orientated, efficient, and export-driven European dairy industry. The European Commissioner for Agriculture and Rural Development, Phil Hogan, sees the change as “an opportunity in terms of growth and jobs”, as producers can now meet growing demand from Asian and African markets. The question is, will this reform be of long term benefit for our rural communities, or will it simply force the price of milk down even further, bankrupting smaller farmers and ensuring the monopoly of a few large-scale producers?
The Irish and the Germans in particular are in favour of this move, planned since 2003. It has been estimated that by 2020 the Germans will have increased production by twenty per cent, whilst in Ireland it may have grown by as much as by fifty per cent. The fear is that once again Europe will return to the era of massive dairy surpluses that preceded the 1984 quotas. A return to the milk-lakes and butter-mountains of the late 1970s and early 1980s would have a crippling effect on British farming. Already, the number of UK dairy farmers has fallen from 36,000 in 1995 to less than 10,000 now. Facing further price drops, there is a real danger that dairy farming as we know it will disappear from the British countryside for good.
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On Tuesday Belgian farmers led a convoy of European tractors to the centre of Brussels to protest against the change. While not the crème de la crème of the dairy industry, by burning the flags of major food processing companies, the farmers expressed genuine fears that small dairy farmers would be driven out of the market. All over Europe, small producers will be under pressure like never before to economise to survive.
With the right government support, the removal of EU quotas on dairy production should be seen as an opportunity for British dairy farmers, not a threat. The reform will undoubtedly reshape the dairy market, but that doesn’t necessarily mean that change will be a bad thing. Under the recent quota system EU exports of dairy products to growing markets in the developing world were hamstrung. New Zealand’s milk production rose from 7.6 billion litres to nineteen billion litres per annum over the course of the quota period, on the back of growing international demand for dairy products. But the EU’s stagnated. The quota system, fining countries for over-production, seriously limited the potential for increasing EU exports and rebalancing the trade deficit.
Already in Germany investment in the dairy industry means that efficient, technology-minded farmers are well prepared for the market’s revolution. Reiss, Europe’s biggest milk producer, has invested €8 million since 2012 in preparing for the uplift in production. Investment in milking carousels that can achieve three milking sessions each day instead of the usual two, or methane capturing systems to cost-effectively heat cattle sheds, means that they are ready to adapt to the change. If British dairy farmers want to not only survive, but prosper in the light of market reform, they too need to invest in technology and the export industry.
With the removal of quotas, European agricultural policy is finally looking outwards to an export led future. The removal of quotas means that smaller British dairy farmers will be forced to compete on a much more open market. If whichever government emerges out of the election wants to see a thriving agricultural economy, it needs to help dairy farmers invest in more efficient means of production. We need the government to support our farmers as they come to terms with new technologies and new export markets, producing cheaper and more profitable milk. Only if we support modernisation in the dairy industry will we be able to have our milk, and drink it.
