Coronavirus has already had a huge impact on industry outwith agriculture, but farming is also being hit hard with the dairy being one of the worst affected.

Figures from AHDB Dairy show that of the estimated 9200 farmers in GB, more than 5200 have suffered a milk price reduction this spring, with price cuts ranging from 0.5ppl to 4ppl and higher.

In addition just shy of 500 had milk collections cancelled, 500 had payments deferred, some 2200 have been asked to reduce milk output and 700 have had the volume they get paid a full price on reduced. A number of farmers have also suffered more than one of these impacts.

So far, three-quarters of the farmers in GB have had some form of impact on them as a result of Coronavirus and AHDB believes up to 12% have been severely affected.

The reduction in milk prices for the month of April alone are valued at £7m, which increases to almost £13m in May when other milk price reductions come into play, putting the overall impact for price cuts at £20m over the two months.

The cost of reducing milk volume will vary greatly between farmers, based on the amount they are required to reduce by, but also on the approach they take to cutting volumes back.

A farmer who feeds milk to dairy calves will be able to offset lost revenue with reduced calf feeding costs, while others can dry cows off early, or reduce feed intakes for feed cost savings. However, it is recognised that the spring is not the easiest time to cut feed for those using the spring grass flush.

According to AHDB, the cost of a 4% drop in concentrates to get a milk volume reduction of a similar amount, produces a net loss to the farmers of 18.1ppl on the volume that they reduce by.

Therefore a 3% drop in milk output equates to 0.54ppl on all of their milk (18.1ppl x 3%). For the farmers so far asked to reduce output, if they did so by 3% the overall cost is put at £1.9m per month. This is the loss of revenue after netting off potential cost savings.

The loss from disposal of milk will be highly dependent on any insurance that the farmer has, but is estimated to be another £280,000 so far in April. Whereas payment deferrals should in theory only be costed based on interest rates, and would therefore be fairly minimal. However, the implications on cashflow for some farmers will be far more significant.

Overall the financial hit to dairy farmers for April 2020 is put at £9.4m. Unfortunately that calculation is unlikely to be the end of the financial pressure, with further price cuts already announced for May and others likely as well as some significant cashflow challenges for many.