This month, Ian Potter makes some predictions on future pricing, casts an eye over First Milk’s plans, offers a bit of timely advice to Ruth and David Archer, and finally takes a look at the latest AHDB activity.
By May, at the very latest, I expect most non-aligned farmers to be receiving under 20ppl as milk prices continue to head south. I also expect that the wholesale re-structuring at farm level will happen this year. One 50 million-litre group of farmers in South West Scotland looks set to receive around 12ppl from April onwards as their milk has no alternative but to head down the M5 to go into powder.
Look at the maths, Intervention Milk Price Equivalent is 14.5ppl, less 2.5ppl or more for transport and broker fee.
This nets back to 12ppl. Dairy farmers continue to score own goals by working on the assumption that producing more litres and spreading the cost is a solution. It’s not, and is a soft option compared to tackling the tougher task of how to cut ppl cost of production, and do things differently.
More milk means more labour, machinery repairs and fuel. As The Archer’s David and Ruth sell their cows to buy a spring-calving herd, one critical mistake by the researchers is the omission of not mentioning their change in milk production to their milk purchaser.
How many others farmers have failed to mention their plans to their buyer? Lots!
In a recently published analysis, Ireland and Holland accounted for a whopping 54% in EU increased milk production from April to November 2015. Even now there are no signs European milk output is slowing down.
The message from this to those who don’t understand is simple: if milk production continues to increase, the farmgate milk price must be acceptable!
Now that First Milk has a new governance structure it seems to be all systems go in a new direction. Of the directors who were in place a year ago only two remain, both of whom are farmer directors. In my opinion good governance with good management triggers better performance and hopefully the results First Milk farmers dream of.
Can Mike Gallacher fix First Milk? At the moment he is cleaning up the disastrous decision-making by the previous board and management. He has succeeded in improving previously wrecked relationships and opened communication links with competitor processors. Exiting Westbury will be worth several millions each year to the firm. If only Westbury was in Cumbria.
Its milk pool is shrinking naturally and Gallacher has a lot of work to do, in particular deciding where the long-term future of each of his milk pools and the supplying farmers might be. Now, AHDB Dairy (again). Sigh. Sorry. I wasn’t going to write about it this month but the two articles AHDB boss Jane King and board member Janette Prince wrote last month have forced my hand. Jane King rightly gave a robust defence of her organisation apart from not mentioning the organisation only received six applications and conducted two interviews for the top salaried position as head of AHDB Dairy.
That is simply not good enough, and she shouldn’t be surprised at the criticism. Janette Prince’s comments were also interesting. I live within walking distance of Janette’s farm. It’s a good walk, but nevertheless it’s in walking distance. And yet how many times has she been to see me in the three years she has been an AHDB board member? Once.
And she sent one email in December 2014. During this period she has received 165 emails from me with my bulletins etc. My point? Come talk to me! By its own admission, AHDB Dairy needs to up its game on communication. This wouldn’t be a bad place to start.
She asks in her letter for ‘Mr Potter to provide some constructive criticism and how I would spend the levy’. Well, log on to www.ipaquotas.co.uk for my comments on their Dairy business plan and you’ll see.
AHDB Dairy is attracting a lot of questions these days for sure, and it is no surprise MPs are taking an interest in its spending plans. Some appear to be showing signs of getting their teeth stuck into what AHDB is, or isn’t, doing. The latest projects from AHDB Dairy to cross my radar came from one of its socalled market intelligence research analysts.
In a circular email sent to processors, AHDB will spend money on updating a seven-year-old processing capacity map last complied in 2009 by retired dairy chief Donald McQueen. In addition, they want to provide guidance about the UK dairy industry’s processing capacity, especially for coping with the spring flush. Processors I spoke to were flabbergasted these are considered priority projects.
One said that ‘AHDB Dairy was blowing the candles out while Rome burns’, while another commented ‘it is like an oceangoing supertanker, going at speed with no idea where it’s going’. I know I’m going to be criticised for having a witch-hunt, but ask yourselves whether there is sufficient scrutiny of AHDB’s spend, and whether the projects being done fall under the remit of solving market failure, or equipping levy payers with the information and tools to grow and become more competitive and sustainable. If they don’t, AHDB Dairy shouldn’t be doing them.
Milk prices for most could be less than 20ppl. How on God’s earth will a new map help? If people don’t like my column, then tough. I have more allies than critics. One reader commented: “Your article provokes a great deal of thought, yet there are people out there (so called industry leaders) spending energy criticising your comments instead of acting on what you write.”
At the Semex conference, David Dobbin, chairman of Dairy UK, echoed a message being sung by just about everyone in the UK dairy industry when he said ‘we need to develop the demand for British dairy products and invest in promotion both at home and in target export markets’.
Almost every organisation – Dairy UK, Dairy Council, NFU, TFA, RABDF, FFA, NFUS – agrees with this. Except one. AHDB Dairy. I rest my case.