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Phil Latham: Weather prayers answered, but some worries about the dairy market

Insights

I think I must have done something good to be rewarded with the last two weeks weather – it is that or my silent prayers have been answered.

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The fields are drying out, first round of fertiliser’s on, and the slurry injector has not stopped moving so the tide is finally turning in the slurry lagoon. All we need now is a bit more warmth for the grass to really get moving.

 

With all the challenges we have had in the last two years I am looking to focus on growth again, which is much more positive than adapting to the loss of a milk cheque or a chunk of your herd to TB. These two factors made it look like we specialised in a uniquely unprofitable system of low output, high input, a system not normally favoured by bank managers.

 

This year as our heifers come in the herd should grow again and we are using some new tactics to increase yield from grass with new software to analyse grass growth, so hopefully we will lower our cost base and increase farm output too.

Take-home messages

A few weeks ago I attended my first NFU conference. It was an excellent couple of days. I think my take home messages were the world inventory for food is running lower each year, which will no doubt stimulate prices and political interference; that political interference and protectionism have a history of making markets dysfunctional; that markets need transparency to work for buyer and sellers; and that in the supermarket world, the big growth area is in Aldi and Lidl, with only Sainsburys doing well out of the big five.

 

On the one hand, farming looks like it is the place to be according to Wall Street investor Jim Rogers, with him forecasting good times and fast cars for all of us, but on the other hand we see in the last few weeks big supermarkets trying to create additional footfall by increasing ‘value’ to customers by reducing four-pint poly packs. They may ease their consumer’s consciences by stating their farmers get a fair price, but that is only on the liquid milk sold, which is a small proportion of the dairy products sold through stores.

 

So the underlying trend looks upward for some commodities, but in the short term I am dismayed there may be a new round of price cuts for dairy as the big supermarkets try and compete for market share.

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