Saturday, October 19, 2019

Brighter prospects – but challenges too, for dairy

October 1, 2019 by  
Filed under Livestock

Dairy farmers are being urged to plan ahead for a hard Brexit – even though leaving the European Union without a deal would be relatively beneficial for the sector.

Speaking at last month’s UK Dairy Day in Telford, John Allen of Kite Consulting said the priority for many UK milk producers would be on surviving the challenging period immediately following our drop out of Europe.

“On 1 November, without a deal, we could find ourselves with no trade tariffs imposed on food, in order for the government to avoid shortages and inflation, while UK dairy exports may have tariffs imposed on them,” said Mr Allen.

“The impact of this will be felt on an industry already suffering the effects of challenges from the structure of the liquid market.”

Input costs

Apart from pressure on prices due to the export conditions, a drop in the value of the pound following a hard Brexit will also have an effect on the dairy industry – with an expected rise in the cost of imported farm inputs.

“The UK remains a good place to produce milk,” says Mr Allen. “We have low cost of production, skilled operators and can grow excellent forage but making sure you have a plan for challenging times is crucial to the survival of your business.”

Brexit is already having an impact on labour. Dairy producers continue to find it challenging to recruit and retain farm staff and the UK is near full employment – meaning meany farmers must look further afield.

But the weak pound is reducing the amount of money sent back home by European farm workers in the UK. A hard Brexit – with its effect on currency – will only impact on this further, says Kite consultant Edward Lott.

Risk factor

“Banks may also be less willing to offer support than in previous downturns. Due to the level of dairy farmers defaulting on capital repayments in 2015/16, dairy farming has moved from low to high risk,” explains Mr Lott.

“It’s worth communicating with your bank manager now, so they have no surprises. Looking to fix future prices on imported inputs and building cash reserves into a dairy farming business makes good sense.”

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