The UK dairy market has largely weathered Covid-19 so far, but could be seriously impacted by Britain’s future trading relationship with the EU.
Dairy Farmer columnist and market commentator Ian Potter warned that shipping milk to the EU is likely to be much more difficult and expensive under the new arrangement and could result in a surplus weighing on the domestic market.
He said: “There is the potential for a financial disaster if we have another big spring flush, because the cost of complying with the new export rules and the costs of shipping surplus milk across borders could be prohibitive.”
However, the EU could be more exposed to the effects of the end of transition than the UK, especially
if there is no deal and tariffs are imposed.
The EU supplied 150 per cent more product to the UK in the first eight months of 2020 than the UK supplied it.
Chris Gooderham, AHDB head of market specialists (dairy and livestock), identified processing Northern Irish (NI) milk as a potential key challenge going forward.
He said: “While NI milk production has increased over the last 10 years, their processing capacity has
remained stable, resulting in more milk processed in Southern Ireland.
“Processing investment in NI has increased capacity over the last couple of years, but we do not know if it is enough to handle all the milk.
“A no-deal could see more NI milk processed in mainland Britain as a cheaper option to paying the export tariff, but it raises questions if there is enough processing capacity in GB.
“There has been some investment in driers in the last few years, placing the UK in a stronger position to cope with any surplus milk, but tariffs could stop exports of these products.
“Double tariffs could also be a concern if NI milk is exported into Southern Ireland for processing then imported back to NI as a product.”
Michael Oakes, NFU dairy board chairman, added: “There is a potential to abuse the system.
“The border between Northern and Southern Ireland could be used as a back door into the UK for Irish products, which may come in tariff free and under the UK labelling banner, distorting the market and placing us in an unfair position.
“The organic milk sector is also at risk. Despite successfully building up substantial markets overseas, it is struggling to get equivalent recognition.”