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farming insurance, farmers insurance, agricultural insurance

Dairy farmers facing COVID-19 related milk market pressures

Milk buyers are raising concern for the dairy industry with having to deal with surplus milk.

The British dairy industry has been experiencing price reductions due to alleged over supply and farmers are being asked to pour thousands of litres of milk away. The current COVID-19 pandemic has already seen panic buying where supermarkets stocks of liquid milk fell into short supply, yet due to the loss of other markets that are not retail, demand for milk from certain sectors has gone through the floor. There are certain dairies that cannot keep up with the demand from supermarkets and then there are processors who have too much milk, as they have been heavily involved in the supply to hotels, pubs and restaurants and educational establishments.

UK’s dairy farmers produce over 40 million litres of milk every day1

Paul Martin, Senior Account Executive from our Kendal branch, recently shared his concerns with his local MP – David Morris MP for Morecambe & Lunsdale - as well as with the Secretary of State for the Department for Environment, Food & Rural Affairs, George Eustice. He said:  

“I understand the impact to my customers' businesses as they were being asked to pour away thousands of litres of milk a day. Along with them experiencing further price reduction. In an industry already struggling I felt matters need to be addressed.”

Paul’s own family are dairy farmers and had been asked to reduce production by 3% or face financial penalties. He added:

“This is not just a case of turning off the tap. Calves will have to be fed more milk, the cow’s diet could be adjusted or you simply pour it down the drain, which goes against the grain.”

The lack of co-operation between dairies due to non-compete rules is at the base of the problem. A processor heavily reliant on supply to café and restaurant trade, suddenly losing a large proportion of their customer base following the government imposed lockdown, has not to date been allowed to negotiate supply to the liquid market for supermarkets.

A client of Paul supplies a dairy where a third of their customer base is café biased. They suffered a 2 pence per litre price reduction imposed immediately citing over supply. Since speaking to his client the dairy has now increased the payment by 0.5 pence per litre but they are still 1.5 pence down. The worry is that unless the dairy industry is protected there will be less UK producers at the end of the crisis, which could mean more reliance upon imported milk.

Increase in demand by consumers on supermarket-sourced milk (Up to 30%) has left some processors struggling with capacity and unable to meet this.2

The Secretary of State for Environment Food and Rural Affairs is fully aware of the issues faced by the dairy industry and he announced on Friday 17th April further measures to help. The government will temporarily relax elements of UK competition law to support the dairy industry through the coronavirus outbreak.With having these competition rules temporarily relaxed, this will allow the dairy industry to work together more and within their communities during coronavirus crisis.

Our dairy industry plays a crucial role in feeding the nation and it is essential that they are able to work together at this time.

Today UK’s food supply chain remains resilient and the Environment Secretary continues to meet regularly with representatives of the food and farming industry to ensure people can get the food and groceries they need.1