I have recently been listening to the bad news about the price of milk while actually milking cows, as my herdsman took a break over Christmas and the New Year. Experiencing at first hand the economic impact of the climate in which dairy farmers are operating gives the issue a whole different meaning.

It seems to me that nothing could better illustrate the institutionalised madness that prevails in the world of globalised, industrialised, commodity-style food production than its impact on the price of milk and dairy farmers in Britain.

As with so many matters connected with food, the root of the problem lies in the distorted economic system. I’ve just been down to my local Tesco store in Bristol, which, along with most of the major British supermarkets, is now selling milk very cheaply, in this case four pints of conventional whole milk for 89 pence (£0.89). Apologies for dancing between pints and litres, but four pints of milk is 2.27 litres, so divide that into 89 pence and you get just over 39.2 pence (£0.392) per litre. This is theoretically the total amount of money that has to be divided between the farmer, processor and retailer.

The conventional milk did not appeal to me, so I purchased two pints of organic milk for £1.14 instead. Doing the same maths, that makes the retail price of the organic milk almost exactly £1 per litre, more than twice the price of the conventional product.

That is what’s happening in the shops, but what about back on the farm? Well, for conventional milk production at least, it’s a pretty horrible story. About a year ago the farmgate milk price was around 37 pence per litre (ppl) – the best for years and good enough to make a reasonable profit. Farmers responded by vastly increasing their milk production, mostly by expanding their herd sizes and further intensifying production, with the very large industrialised farms getting even bigger. The phrase ‘turkeys voting for Christmas’ comes to mind. Now imagine this happening all over the world, combined with a good growing season for dairying weather-wise. The inevitable consequence has been a serious over-supply of the milk market.

To cap it all, Russia then banned imports of dairy products from the European Union in response to EU sanctions over Ukraine, which precipitated a catastrophic downward slide in farmgate milk prices. Ironically there are a number of parallels with the dramatic fall in the price of oil.

As a result, most producers are only receiving just over half the price they received about a year ago; currently as little as 22 ppl for conventional milk, which is well below the cost of production.

There is only so long that any farmer can lose serious money on every litre of milk, and needless to say it is the small, so-called ‘inefficient’ family dairy farms (which represent the backbone of rural culture in England, Wales and Scotland) that are being forced out of business the fastest. With support from their banks the biggest farms will survive by intensifying further and growing bigger still – something that has negative implications for the environment, animal welfare, rural communities and milk quality.

Last week, the total number of dairy farms in England and Wales dropped below 10,000 for the first time and all the signs suggest that the exodus will continue. This is a kind of cultural cleansing by price, with the farmers giving up quietly without fuss as their bank managers politely tell them that they have nowhere to go and had better quit milking while they still have some equity in their business.

Are there any rays of hope on the horizon of this bleak landscape?

Well, it is slightly better for organic producers. At the time of writing this, the West Wales farmers co-op that supplies organic milk to Rachel’s Dairy, now owned by Lactalys, a French company with a tradition of looking after its producers, are paying a base price of 40 ppl – in other words, double the conventional price, although I suspect this too will drop in the near future.

Otherwise, the prospects for non-organic dairy farmers are bleak indeed, with the leaders of the farming industry still advocating that we have no choice but to continue to ride the roller-coaster of global prices, as they foolishly believe that this is the most efficient means of regulating supply and demand.

In practical terms, this means that only when a sufficient number of dairy farms have gone out of business will the market turn and prices pick up again. A jargon label has even been invented to make the phenomenon more legitimate: it’s called ‘price volatility’! Prices will go up, there will be another surge of intensification, prices will slump, and so on and so forth. As a result, there will be ever-fewer dairy farmers, with the industrial-style survivors producing vast quantities of commodity milk from permanently housed cows that are fed on genetically modified grains and never allowed out to pasture. This is a story that, if you knew it, would probably discourage you from wanting to buy milk at all.

The Today Programme has covered this twice over the last few days. In the first discussion I heard Meurig Raymond, President of the National Farmers Union, and David Handley, Chairman of Farmers for Action (a French-style blockade-the-supermarkets group), bemoaning this bleak situation. But when the presenter asked them what could be done about it, neither of them really had an answer, apart from blaming the supermarkets for the ongoing price wars. But is there the slightest chance that the supermarkets will change their practices when they too are engaged in a struggle for the survival of the ‘fittest’, in this case currently Aldi and Lidl?!

I thought not, so after the programme I rang up the editor and suggested that the only way to improve the financial fortunes of dairy farmers will be through the emergence of some kind of public contract, perhaps based on the principles of fair trade, where consumers can buy milk and dairy products knowing the price the farmer has been paid is equitable and fair.

Interestingly they ran another piece on the Today Programme this morning in which fair trade was mentioned but there was no clear call for action. So here’s what I think could be done: why not introduce a fair trade label for milk? I’d be very interested to know what the UK Fairtrade Foundation thinks about this idea. Since about 10 years ago, when I was at the Soil Association, we did try to develop a fair trade organic label, but when we approached the Fairtrade Foundation we received a clear message that, “Fairtrade is about tea, coffee and bananas produced by peasant farmers in developing countries, not featherbedded, heavily subsidised, rich European producers!?”

At the time, we backed off – mistakenly in my view, with the benefit of hindsight – as we didn’t want to pick a public fight with those guys. But it still seems to me that fair trade should start at home and that means using our purchasing power right now to support all those beleaguered small family dairy farms on the edge of a precipice, through the introduction of a fair trade milk scheme which gives them a guaranteed fair price, providing their production systems are ethical. If we don’t do this the family farms will disappear simply to be replaced by ever-larger industrialised farms where the cows are put under ever-more pressure to produce milk yields beyond their metabolic limits.

So, let’s challenge the various certification organisations to introduce a fair trade milk label, with some conditions for entry? In my opinion the scheme should be restricted to farmers with herds of fewer than 400 cows. That’s because the cows should be required to graze pastures during the summer season and larger herds need more land to graze, which means the distances they have to walk night and morning become excessive. There would also be other restrictions that would ensure the story behind the fair-trade mark met with customer expectations.

In parallel with the introduction of such a label, there needs to be a proper investigation into the true cost of environmentally and socially sustainable dairy farming. That way we can come up with an objective price for milk production that avoids damaging environmental and human health consequences, while at the same time preserving natural capital, avoiding pollution and promoting public health. This is a project that the Sustainable Food Trust will champion as part of our True Cost Accounting initiative. But in the meantime, it should be relatively simple to come up with a minimum price based on existing research on the cost of production and linking this to any agreed ethical, welfare and environmental criteria.

Featured image by Steph French

Sign up to our Newsletter

Stay up to date with the latest SFT views and news

  • Oliver Dowding

    Patrick, this is well argued and reasoned. I remember when you tried to
    get the fair trade initiative off the ground. The question is this: we
    can all identify the problem. At farm level the cost base structure has
    three big differentiating variables, depending on whether the farmer has
    to fund debt, labour or rent. This of course dramatically impacts the
    breakeven cost of production.

    The same disparities will apply in
    the processing and retailing parts of the milk food chain. To provide a
    fair return, based on “true cost accounting”, needs to consider whether
    we’re going to enable everybody’s cost structure to be funded with a
    fair return? Suppose the set price was 33ppl on farm, there will be
    some for whom that’s a very agreeable level and others for whom it
    enables survival but not much more, because of the aforementioned
    disparities.

    Are we to see the same prices at the retail level?
    How will the retailers take to that? Who will enforce it? Is that the
    end of competition?

    Whatever the result, whatever the decisions,
    there’s nothing I would like more than to see stability. The constant
    yo-yo and extremes are totally destructive, reducing the interest in the
    young to become involved, causing the amalgamations and exits you
    describe. It crushes the desire to invest in all aspects of the farm
    business. Does the solution not require everybody to be sitting around a
    table and all agreeing the same policy? How likely is that? If all
    sectors of the milk supply chain agreed to the same policy, how long
    before somebody breaks rank? None of this is to suggest that we should
    try to find a workable solution as the alternative is unthinkable.

    • Caroline Obank

      How about ‘Free Range’ as a milk label/logo (instead of ‘fair trade’).

      The ‘Free range’ concept has worked well for hens and eggs, the buying public know what it means. Cows can (metaphorically) jump onto the hens’ bandwagon, consumers could be persuaded to pay a bit more for their milk where produced by cattle that graze (in the summer). I think there is a dairy farmer in Devon who labels his milk as ‘free range’, but perhaps an organisation such as RSPCA Freedom Foods could develop a Freedom Foods free range milk scheme.

      A consumer-led push for adequate milk prices, if successful, would be more solid and sustainable than a scheme which relies on enduring commitment from the fragmented parties within the supply industry.

  • Martin Meteyard

    I think it would have been (and still would be) a mistake to conflate
    addressing this important issue with the Fairtrade labelling initiative,
    which is specifically directed towards supporting farmers and other
    producers in developing countries. But that doesn’t rule out
    collaboration and the use of the same ‘cost plus’ methodology with a
    ‘Fair Milk’ or ‘Fair Dairy’ label. The First Milk co-operative (100%
    owned by fairy farmers) should be exploring that right now. I’d be happy to discuss this further based on many years of experience in the Fairtrade movement: martin.m@pop3.poptel.org.uk.

  • Greengate

    Completely agree. I’ve often thought it would be good if supermarkets would offer consumers the option of paying either the ‘supermarket price’ or the ‘farmer price’ at the checkout. so when paying for exactly the same product you could offer to pay a few pence more to support British dairy farming. I know I would opt to do this, especially after payday.

  • a8jtw

    Great article, points well made. One note for the sub-editor: it should be ‘fewer than 400 cows’, not less than. You can count cows.

  • ClareOliveJune

    I’d like to see some form of certification that lets the consumer know they are buying British milk from grass fed cows at a fair price to the farmer so that it doesn’t drop below either the price it costs to produce at the least. But WHO exactly needs to collaborate to make this happen? And HOW? Apart from the Fairtrade Foundation and Soil Association?