Global milk prices have seen some positivity in recent months but while EU and New Zealand values are heading up, the UK will always lag behind when processors can hide behind increased supplies from the ‘spring flush’, which are not only curtailing margins but also investment in the sector.

Add to that the uncertainties surrounding Brexit and it comes as no surprise that many Scottish dairy farmers are struggling.

These were just a few of the conclusions that emerged from last week’s highly successful AgriScot seminar at Ingliston, jointly hosted by the Scottish Dairy Hub and Kite Consultancy.

“Milk is never in short enough volumes for long enough to give dairy farmers the upper hand to pressurise the processors to increase milk prices,” said Chris Walkland, an industry commentator.

Speaking at a packed out seminar, he said average milk prices had slipped by almost 2p per litre over the past year, with Arla, the best payer reducing it’s milk price from 31.5p per litre in November 2018 to 29.0p. This compares to First Milk, which 12 months previous was the worst payer at 28.5p, is now the second highest at 27.0p.

Yet, while First Milk has improved it’s profile to be the second highest payer, Müller and Grahams, remain two of the worst at 26.75p and 26.3p, respectively.

In contrast, global milk prices are heading north backed up by a flying trade for skimmed milk powder (SMP) which has bolstered the Actual Milk Price Equivalent (AMPE) including 2p per litre transport, EU and New Zealand futures markets to 29-30p per litre and 29-31p per litre, respectively, with GDT scores at 29-30p.

Backing up these statements, the overall price index rose 1.7% at the latest Global Dairy Trade (GDT) event – the fifth consecutive rise for the New Zealand-based dairy commodity auction.

Figures from AHDB also show that whole milk powder (WMP) and SMP, which make up the bulk of volumes sold, rose 2.2% and 3.3% respectively. Cheddar was up 2.5%, while the butter price index slipped 1.3%.

After being on a slightly downwards trend through the middle of the year, the WMP and All Products price indexes are back to levels seen in April 2019. SMP has exceeded this and has been on a strong upwards trend over the last two months, while following a price spike earlier in the year, butter prices are more subdued.

Yet, despite these improved values, results from a survey to assess the current mood of dairy farmers in Scotland, suggests much of the industry is ‘on a knife edge’.

The survey, which included more than 125 responses, found that more than 60% of dairy farmers who responded said they are ‘not so confident’ or ‘not at all confident’ about the direction of travel for the their industry, with just over 15% ‘extremely confident’ or ‘very confident’.

However, there are some mixed messages. Around 30% of respondents said they have ‘no confidence’ to invest in the short-term but the same proportion say they are ‘very confident’ or ‘confident to invest’, with a further 40% in between.

That led the survey authors to state that confidence levels can easily swing one way or another, depending on what happens with regards to future agricultural policy and the milk price. They state that both government, and milk buyers have a role to play here.

When compared to 2016, when milk prices crashed, a third say their businesses are stronger, while two thirds believe their businesses are unchanged.

Looking to the future, a third of farmers are intent on expansion, mostly by up to 10%, but two-thirds will keep output the same. Only 7% are looking to cut volumes. Based on this survey, it looks as if milk volumes in Scotland will continue to grow.

And there is reasonable optimism among farmers for life post Brexit. Some 60% state their businesses will be about the same or better off after Brexit.

David Keiley, Kite Consulting’s senior advisor in Scotland, said: “Scotland has a very polarised milk field, with some farmers getting very good milk prices, but most aren’t.

“A lot of businesses have been cash negative for a while, and that is putting a lot of pressure on them. Many are on a knife edge currently having to deal with increasing overdrafts, higher levels of debts per cow and creditor burdens.

“Whilst we have very efficient businesses in Scotland, the survey results reflect the position of the Scottish dairy industry and the need, going forward, to determine a clear strategy for the future in light of the present challenges facing dairy farmers.”

NFU Scotland’s milk policy manager, Stuart Martin, who also runs the Scottish Dairy Hub said: “The survey and its results are significant and have implications for the whole supply chain in Scotland and the many stakeholders that engage with Scottish dairy farmers.”