Dairymen rise to challenge
Peter Winstone is a Somerset dairy farmer and a farmer-director of the Plymouth-based farmer co-operative Milk Link, an organisation that has grown enormously since its birth only six years ago, and is now a major player in British dairying. Suppliers have complained about low prices for their milk, but Rome wasn’t built in a day and they will now be starting to see real returns, he says.
AS a partner in a 180-hectare family-run dairy farm, I believe I am well placed to understand the undoubted financial and commercial pressures that are impacting on the dairy industry both within and beyond the farm gate.
Yet, despite what the pessimists might say, I believe that by working together and taking control of our own destinies there is a future for dairy farming – and particularly so in the South West.
That is not to say that there are not major challenges confronting dairy farmers and the industry as a whole.
Greatest among these is the considerable financial strain being put on farmers as a result of declining returns from the market driven by factors such as CAP reform, adverse currency fluctuations, the major retailers’ pursuit of ever-cheaper prices for their customers and threat of cheap imports of dairy products from abroad.
This is exacerbated by increased costs of production, in particular the increased cost of energy and labour seen in the last year. At the same time dairy farmers also have to cope with issues such as Bovine TB, and increasingly stringent and complex environmental regulations and red tape emanating from Westminster and Brussels.
So what can dairy farmers do to establish long-term financial security and what is the justification for my optimism for the future of dairy farming?
A key factor for the future of the dairy industry must be the achieving of greater efficiencies both within our dairy processing industry and on farm.
As a major processor Milk Link is striving to be ever more efficient through investing in new plant and technologies and taking out old equipment.
At the same time we are seeking to encourage the transfer of knowledge and best practice among our farmer members through the work of a dedicated technical team. Indeed we recently commissioned Exeter University to undertake a study of our members’ farms to identify key areas of efficiency. This concluded that there was over £50,000 difference in profit between the top quarter and bottom quarter of similar-sized farms. So farmers can make a difference within the farm gate – but I believe that on its own this is not enough.
Farmers must also co-operate together and invest beyond the farm gate in dairy processing to enable the UK to produce added-value products; take a greater share of the price of the end product (rather than letting these go to shareholders, City pension funds and investment houses), and secure a stable, long-term market for the milk they produce.
Of course the last point encapsulates precisely what I and some 2,000 members of Milk Link are doing.
Five years on from when Milk Link acquired its first creamery, we are today one of the leading dairy-processing businesses in the UK with a turnover of £580 million, nine processing facilities and 1,600 employees.
We produce a wide range of high-quality dairy products from long life milk and creams to award-winning cheeses and fresh dairy ingredients. Our customers include all the major supermarkets, and many of the UK’s leading food service and food manufacturing businesses.
We recognise the need to innovate and market new dairy products. These include products that meet consumer demands linked to regionality, sustainability and traceability, products that deliver benefits such as greater shelf life and convenience, and healthier more functional products such as the cholesterol lowering Flora Pro Active, which we manufacture for Unilever, and our award winning, innovative half-fat cheeses. This month we have also launched a new branded cheese made at our award-winning Taw Valley creamery in North Tawton, Devon.
Milk Link took an important step forward in October, returning £5.7 million in cash to its founding members. Back in 2001, we committed to return this money within five years, and we delivered on this promise.
At the same time an additional £1 million was reinvested by members in Milk Link demonstrating their continued confidence in Milk Link’s future. And we are now making its first processing payment to members. At least £2 million will be shared among members, representing an interest payment on the value of the Qualifying Loans that each one holds.
This is the first such payment made by any major dairy co-operative in the UK, an important step in rewarding financial investment.
At the same time Milk Link has witnessed an increasing stability in the markets in which we trade and we have been able instigate a number of small increases in our members’ milk price.
Everyone appreciates that this is only the start.
As an industry we need to deliver more back to dairy farmers to give them a long-term sustainable future.
