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Stackyard News Aug 06

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    Milk Production Report Gives First Insight into Downsizing

A report by the Milk Development Council (MDC), requested by NFU Scotland and published on Monday, has for the first time provided an objective analysis of the possible consequences of a significant reduction in milk production by British dairy farmers, which has been called for by some processors.


The report, entitled “Routes to Profitability: Is reduced milk production the solution?”, concludes that there is no straightforward solution to the problem of low profitability of dairy farms caused by poor farm gate prices for milk. It emphasises that the only way in which production can be reduced is through further cuts in price. But reducing production would fail to deliver a higher or even stable milk price. Instead, dairy farmers would face further price volatility and uncertainty.

Reacting to the report, NFU Scotland Vice President Jim McLaren, said:

“I very much welcome the fact that for the first time we have an objective analysis of the effects of reducing milk production in Great Britain. The most important message I take from this report is that there is no simple answer to the problems facing dairy farmers. Reducing production is not the panacea that some would suggest.

“The report confirms that British dairy farmers are amongst the most efficient in Europe, and that there is therefore no reason for us to concede any part of the market to our competitors. It also shows that, even if we stopped producing milk to make into butter, milk powder and mild cheddar, the new milk price could be lower than today’s. And to stop producing these products altogether, we would have had to lose anywhere between 20% and 45% of our dairy farmers, affecting not only the livelihoods of farming families but also many other rural businesses and significantly changing the landscape of the British countryside.

“The report suggests that rather than looking at reducing production, it would be more productive for the industry to focus upon alternative strategies. These include improving efficiency throughout the supply chain, adding value through innovation and renegotiating contracts that focus on these objectives.

“The report lays down a challenge to the whole industry to focus on these areas. British dairy farmers are among the most efficient in Europe but we’re not saying we’re perfect. The world doesn’t owe us a living and we are all obliged to look at every cost and strive to remain an efficient industry.

“Likewise, the processing sector has a responsibility to continually look at innovation and branding and work with producers to drive the industry forward. It is this, combined with a more transparent supply chain, which I believe will keep dairying alive.”

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