AHDB Dairy and Dairy UK are in discussions about a possible campaign to promote UK milk products at home and abroad, as further pain was predicted for producers in the coming months.
The talks are looking at whether a combination of levy payer and EU money could be deployed to protect and build UK market share at a critical point for the UK dairy industry.
Dairy analyst Chris Walkland told a meeting of dairy farmers at this week’s NFU conference UK milk production remained ‘massively out of kilter with demand’.
Despite low milk prices, UK milk production over the past 10 months is currently running at 1.27 billion litres above the 10-year average - enough to fill 45,500 tankers lined up from London to Edinburgh.
This is alongside increased across the EU, notably in Ireland, where producers had exceeded production levels by a similar volume.
With the spring flush around the corner, Mr Walkland’s number crunching predicted there would be 77 consecutive days between April and June when daily production exceeded the average of the previous four years.
This could include 30 consecutive days when volumes exceed 44.5m litres, with a daily peak of 45.2 million litres - compared with spring flush average in recent of about 40m litres.
There was a real danger, he warned, there would not be enough UK processing capacity for this milk, which could see it traded on spot markets for about 10ppl and a B price of just 6ppl.
This had the potential to wipe another £460m off dairy farmers’ bottom lines, he said.
Various price indicators pointed to average A prices of 19-20ppl over spring and summer, which masked the vast difference between aligned and non-aligned price, Mr Walkland said.
Pointing to the impact of the Russian import ban, Mr Walkland said farmers were ‘paying the price for Putin’s politics’ - and urged the industry to stress this point to Government.
But he also suggested the industry was ‘obsessed with production’ and not sufficiently focused on consumers.
In a constructive meeting which sought to find solutions among the gloom, Dairy UK and AHDB Dairy representatives revealed they were having talks about a possible industry dairy promotional campaign.
If it got the green light, the campaign, which would also involve other industry bodies, would be funded by levy money and potentially, when it is available next year, EU funding.
The aim would be build on Dairy UK’s recently-announced export strategy and also to promote to UK consumers the benefits of milk, including its health and nutritional benefits.
The plan was to present a proposal with various options for a promotional campaign to AHDB Dairy’s board in March.
Dairy UK chief executive Judith Bryans said: “You cannot promote your way out of volatility, but you can develop a market for the future and make sure you do not hand markets to your competitors.
“We are on a mission to grow exports in terms of value and volume.”
AHDB Dairy chairman Gwyn Jones said AHDB had received a ‘very clear message from levy payers’ about the need to change how it spends levy money.
He said the campaign would also include other organisations, such as NFU, but stressed the details of how the funding will be used were yet to be finalised.
"We are in intense meetings with Dairy UK to get this show on the road because we want the board to sanction this in March.
"The first step is to free up that money from the budget and get the board to agree to it. Then the plan is to get funding from Europe to multiply it several times and that gives levy payer leverage which is what we need,” he said.
NFU dairy board chairman Rob Harrison said: “The next six months is looking pretty bleak. We are going to see a lot of milk around and there is a lot of milk in store.
"The markets are going to be tough for a while and we are seeing a lot of producers who will struggle to carry on at these prices, so, sadly, we are going to see a lot of producers exit the sector.”
He stressed the importance of better farmer representation with processors so both sides ‘better understand each others’ needs’
The meeting also saw an intense discussion about the widening gap between aligned producers and their non-aligned counterparts, who many felt were paying the price for those aligned prices.