Dairy UK has written to Defra Secretary George Eustice urging him to work alongside Treasury to develop a financial support package to help the industry navigate the adverse effects the coronavirus has had on the sector.
The letter, sent on April 3, follows the severe market disruption which has taken place in the dairy sector as a result of Covid-19, with unprecedented demand in retail and the collapse of food service outlets resulting in falling milk prices and delayed payments from processors, and milked being dumped by farmers as of April 5.
Paul Vernon, chairman of Dairy UK, wrote: “The Covid-19 crisis is hitting the industry and although our members will all be at different stages of the distress curve, the reality is as the weeks go by, more and more of the industry may experience problems with oversupply and a lack of demand.
“The UK dairy sector is acutely conscious of its responsibilities to the nation as a provider of dietary staples and will do its utmost to prevent milk being wasted and maintain the flow of product to consumers. However, I and my colleagues are very concerned about the impact of the current situation on dairy farmers.”
Understanding the cost of Covid-19 will be passed through the processors straight to producers, Dairy UK has called for four ‘measures’ to ensure the industry remains the provider of dietary staples.
Bank support – “It is important banks are able and willing to help dairy farms through the disruption caused by the crisis. Government should work with the major banks to ensure they can help sustain the farming sector until some semblance of normality returns.”
Direct support for farmers disposing of milk – “Loss of milk collection and processing capacity may force farmers to dispose of milk on farm. We ask Government to compensate farmers for any milk which needs to be disposed of during this time.”
Direct support for farmers suffering major price cuts – “Separate from disposing of milk, some farmers may suffer from severe price cuts because their milk processor has lost customers because of the drop in the out of home market, is suffering from major cashflow issues because their customers have problems or was forced to redirect milk volumes to low value markets, such as commodity market products, for which prices may become depressed. In this case all the farmers supplying that processor may be subject to significant price reductions which could last until the processor is able to reconfigure their business or get milk processed elsewhere. In whichever case, farmers should receive support from Government for such price cuts.”
Market support measures – “The European Commission still has at its disposal a suite of market management measures that can be used to support the European dairy market, such as intervention purchasing and Private Storage Aid. The European Dairy Association (EDA), of which Dairy UK is a member, has written to national representatives of the Special Committee on Agriculture to ask for their support in convincing the Commission to open the toolbox and support the sector.”
Mr Vernon added: “Things are moving quickly and as a result we need to seek your support now in mitigating impact so that we come out the other side with an intact industry.
"We need our dairy farmers to be in a position to weather this storm considering the essential job they do for the country.”
The letter is to be sent to all relevant Ministers in the devolved administrations.