Old Mill accountants are reporting that dairy farmers’ incomes have fallen significantly in the last year and may fall even further before the end of this milk year. By Alice O’Sullivan
The accountants say that non-aligned milk prices fell by 4p/litre and 6p/l between March 2014-2015 and March 2015-2016.
Suppliers aligned with supermarkets, however, only received price cuts between 1p/l and 4p/l. Andrew Vickery, head of rural services with Old Mill, says this smaller price cut is mainly due to lower production costs.
Vickery goes on to say that the price on supermarket-aligned contracts fell more than the cost of production, leaving dairy producers with a huge drop in profits and a “steep drop in turnover, which in many cases has translated into serious cashflow problems”.
Signs of improvement
While talks remain of an increase in milk prices, the accountants are warning farmers not to expect any improvements in profits during the 2016-2017 milk-year.
Even if milk prices are to improve by 4p/l during this year, it still won’t make much of a difference to the average price. The pound’s weak standing at present is causing an increase in imported feed prices for UK farmers.
Dairy incomes have undergone huge losses in recent times, but Vickery says all the losses will make a farmer’s business more economical and capable in the future.
His advice to farmers is to plan a cashflow forecast, don’t engage in too much cost-cutting as it could prove damaging to the business and if milk prices increase, farmers should not get carried away with spending money they don’t have.