In support of dairy farmers
Half a century of pain – with five dairy farms going out of business every week since the Second World War – has terminated in crisis. At least half of all dairy farmers are now being paid less than their cost of production, and will soon be driven – unless something changes – into bankruptcy. Jim Paice, the Minister responsible, has agreed to come up to Cumbria to see our local farmers, and try to suggest a solution. But it’s not going to be easy. For a start, no two dairy farms are alike.
Walking along the River Eden last year, I saw friends with dairy farms near Appleby, Kirkoswald, and Croglin. Each family lived in a red sand-stone Cumbrian farmhouse, and served their visitor large plates of fresh scones and sandwiches. Each man was from a long farming tradition, had a quick brain, detailed technical knowledge, a clear sense of cost, and far more cows than their grandfather, each producing far more milk. Each day began in the splatter of the parlour pit at five in the morning, and continued through feed cake mixes, and health-monitoring – and driving the cows again through a second milking – twice a day, seven days a week. Each lived on a relentless never-ending treadmill, with udders ever-filling and needing to be milked, and a constant stream of expensive feed, expensive fertiliser for silage, and expensive tanks for slurry. Each had tied up over a million in parlour and milking machines and cows, and was locked in a rigid contract, with a processor that could drop the prices with little notice.
But every business was different, experimenting with varied breeds, feeds, and types of milking machines. Appleby was organic; Kirkoswald was non-organic with a fully-automated machine; and further along the East Fellside the cows were grass-fed. Those who were running intensive Holsteins with more months on indoor feed focused day by day on every detail of diet and condition as though they were monitoring an Olympic athlete. Those who have gone for a New Zealand model – with less time indoors, less grass conserved for silage, less expensive feed, and more time outside in the grass –had slightly tougher animals but produced less milk. They had to monitor soil temperature, check the exact condition and growth rate of the rye-grass, move the fences. Some sold milk targeted at cheddar, others premium organic liquid. But all were ultimately effected by global commodity prices. The cost of fuel, fertiliser and feed determined month by month which model was more profitable. And because one litre of milk was like another, so marginal price differences allowed processors to switch from liquid, to powder, to cheese. And as milk prices fell outside Britain, the price of cream plummeted. And because there were thousands of farmers negotiating against a powerful wealthy, small numbers of processors and super-markets, almost all the loss was passed onto the farmers, who being tied into rigid contracts, were hit very hard.
How can an MP or a Minister help? First, by creating a regulator, to stop the supermarkets engaging in sharp practices at the expense of famers (colluding, or dumping milk as a loss-leader); second, by pressing all the buyers to sign up for more flexible contracts with farmers. If farmers were able to move between processors (rather than being tied in for over a year), the trade would be fairer, and they would be less brutally imprisoned by market movements. And if the contracts could be tied clearly to the global commodity price, farmers would at least understand how they were being paid, would be able to benefit from the good times, as well as suffer from the bad times – and begin to plan their business. If processors won’t accept these contracts voluntarily, we, in government, should force them with laws.
Government policy, however, is only part of the answer. Farmers also need to organise and co-operate more. Here, Cumbria may offer a national model. Because we are a long way from the retailers of the south-east, we have long had more processed milk, and more farmer co-operatives. This has not always been good –Dairy Farmers of Britain, for example, hurt many when it collapsed. But now that First Milk seems increasingly impressive, and Milk Link has been absorbed into Arla, Britain has two large, energetic processors, owned by farmers, which as they invest and diversify more will become better able to fight for farmers’ interests.
If the price cuts are reversed this week, some farmers – particularly those with liquid contracts in the South – may conclude that they don’t need to co-operate. But in the long-run, unless farmers form their own organisations and take back control of the relationship, the giant supermarkets and processors will pick them off, one by one. We should study the examples of farmers in Holland, Denmark, and New Zealand who have long been in strong, business-savvy co-operatives. And as I hope to explain to the Minister when he visits in two weeks’ time, the rest of Britain could study the steps Cumbria has already taken.