The farming industry has warned that the price of dairy products such as milk and butter could rise by more than 50 per cent in another blow for people during the ongoing cost of living crisis. A 'tsunami' or rising farming production costs has been blamed for this.
Long term inflation increases and the ongoing war in Ukraine has led to a surge in price of farming essentials such as fertiliser, fuel, and animal feed. This means the cost of four pints of milk could rise from £1.15 to between £1.60-£1.70, according to the UK's leading adviser to dairy farmers, Kite Consulting. An average pack of butter could increase from £1.55 to more than £2.
The Telegraph yesterday reported that UK dairy industry bosses flew to Brussels last week for talks over this issue. Dairy processors, which act as the link between farmers and retailers, are very concerned over costs which have undergone a 'seismic' change since the Russian invasion of Ukraine.
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Michael Oakes, the dairy board chair of the National Farmers’ Union, told BBC Radio 4's Today programme this morning: "It's been a contentious subject (the price of milk) at a retail level for many years. But what we've seen over the last couple of years is a very sharp rise in inflationary input costs at farm level and then since the Ukrainian war we’ve seen a seismic change (in costs). It just hasn’t been sustainable.
" Retailers are stepping up because volumes are dropping, farmers are having to make tough decisions in the way they feed their cows. For myself it's a case of fertiliser costs have gone up over 200 per cent and either I borrow the money to buy the fertiliser or I get out of dairy. Many farmers are in that situation.
"We have seen Muller and Arla making public statements saying unless the retailers step up there’s going to be a shortage of milk and none of us want to see that and other dairy products across the world are at an all time high. If you’re a processor supplying a retailer in the UK and you’ve got an option to actually get a fairer return back to your suppliers in order to keep them in business you may have to send the milk elsewhere."
Dairy giant Arla's boss, Ash Amirahmadi, 'called time' on cheap milk in a statement two weeks ago saying farmers have been facing squeezed milk prices for years. In the last 10 years consumer prices have gone up 26 per cent as a whole, Mr Amirahmadi said, but the price of milk has dropped by 7 per cent in the same period.
Mr Oakes added that these price increases for farmers is likely to be a long-term problem. "The implications of current rises could well last for two years. Feed, fuel and fertiliser are the key inputs and we’re also seeing issues with labour and the costs of labour so we’ve got a whole tsunami of costs coming towards us and it’s really really difficult," he said.
" U ltimately farmers are making decision to either cut production to try and stay in business to get through this or face those costs up. But we need support from the market level ultimately.
"Unless farmers can make a return on producing milk the milk won’t get produced ultimately and we’ve seen costs go up and perhaps we may see buyers changing their behaviour but some of the alternatives are also going to go up at the same time."
