WITH A costly winter ahead, Scottish dairy producers needs an across-the-board farmgate price increase to give them the confidence to carry on.

That is the message from NFU Scotland milk committee chair – and Stranraer dairy farmer – Gary Mitchell, who has highlighted that the sector's costs for both inputs and labour were now 'escalating at an alarming rate of knots'.

“In the past couple of weeks, we have seen milk prices make positives moves, but this is not across the board and all dairy farmers in Scotland must start seeing an increase in their milk price immediately," said Mr Mitchell.

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“I speak to farmers on a regular basis and when I hear some farmers report that their milk price still begins with a 'two' then I know these farms must be struggling to keep their heads above water, never mind run businesses which require huge amounts of investment to meet the changes that the sector is currently facing in both the short and long term.”

Mr Mitchell warned that if buyers failed to send positive price signals, a further decline in dairy farmer numbers was on the cards. The latest AHDB producer figures, based on the number of levy paying farmers, indicate that there are only 8000 herds remaining in Great Britain, with 310 dairy farmers having quit the sector in the past 12 months. Scotland itself has only 836 herds, and that figure may further reduce when the Scottish Dairy Cattle Association releases its figures in the next few weeks.

Mr Mitchell insisted that his call for a price increase was fully justified. The UK average farmgate milk price for September 2021 was 31.72 pence per litre, up 1.4% on August 2021. But the spot market for milk is currently trading well into the 40ppls and, more significantly, has been trading above 30ppl since July.

But not all farmers are seeing the benefits of these positive market price indicators, said Mr Mitchell, and that needed to change. Pointing to the recent report from Kite Consultancy named 'project reset', he noted its finding that input cost price rises in the dairy industry were now 'rampant' from primary farm level through to dairy processors, and its conclusion that it was unreasonable to expect that these costs should be absorbed by processors and farmers. Instead, Kite argued, there was no choice but to pass these costs on to consumers through higher prices for liquid milk, cheese, and butter.

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"If cost compensation is insufficient then milk volumes from farms will fall, and more of what is produced may effectively migrate away from the UK market and on to the global market," the Kite report warned.

Mr Mitchell concluded that for too long, achieving 30 pence per litre had been seen as the 'great target' for dairy farmers, after which their financial troubles would be over: "With rising costs on labour, feed, fertiliser and fuel and a constant demand for additional capital investment projects to stay in touch with industry demands, then it is not too ridiculous to suggest that 40ppl is the new 30ppl.”