Blog: Katy AskewLow global milk prices hitting dairy farmers

Katy Askew | 10 August 2015

UK farmers grabbed the headlines this weekend when they paraded two cows through an Asda store in Stafford in protest over the price they are paid for milk.

In a video posted online, protesters are shown explaining: "We cannot afford to sell milk at this price... milk should not be cheaper than bottled water."

This is the latest protest from dairy farmers in the UK, where they have also cleared supermarkets of milk – either paying for the product or leaving it at the checkouts. UK supermarkets are the focus of farmer anger amid fierce price competition over the price of milk.

Farming unions are holding a "crisis" summit today (10 August) in London.

UK farmers are not alone in their struggle with low milk prices. Global milk prices have been forced down by an oversupply and declining demand in markets like China and the Middle East. According to a report published by the United Nations Food and Agriculture Organization, global prices for food commodities hit their lowest level for six years in July.

The FAO food price index fell 1% month-on-month and 19.4% versus the same period of last year, weighed down by lower dairy prices. The value of dairy commodities dropped 7.2% from the previous month. The FAO attributed the decline to "lower import demand from China, the Middle East and north Africa amid abundant EU milk production which has resulted in good availability of dairy products for export".

French farmers have also staged protests over the low price of milk, blockading border roads with Spain and Germany to highlight "cheap imports", which they blame for forcing prices down.

Last week, New Zealand dairy giant Fonterra lowered its payout forecast to farmers. The world's largest dairy exporter said that the current price is “unsustainable”.

"Current prices are unsustainably low and we are seeing them beginning to impact production levels globally," chairman John Wilson explained. Fonterra is facing pressure to abandon its global dairy auction system, where milk powder is sold monthly via an online auction, with farmers insisting that an auction in a down market is failing to deliver value.

Dairy farmers from across the big producing regions all have the same message: the low price they are receiving for their milk is unsustainable. If demand fails to bounce back and prices remain depressed, production will fall - a euphemistic way of saying farmers will go bust. If this does happen, lower supply should lift prices once again - good news for the remaining dairy producers, but too late for those whose businesses have already failed.

Sectors: Dairy

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