A number of UK dairy farmers were forced to dump milk over recent days as the COVID-19 pandemic continues to play havoc with the UK’s dairy market.The shutdown of restaurants, cafés, takeaways and other food service outlets has crippled a vital route to market for many UK dairy companies, forcing them to slash milk prices and ask farmers to reduce milk supply.
A number of UK dairy farmers were forced to dump milk over recent days as the COVID-19 pandemic continues to play havoc with the UK’s dairy market.
The shutdown of restaurants, cafés, takeaways and other food service outlets has crippled a vital route to market for many UK dairy companies, forcing them to slash milk prices and ask farmers to reduce milk supply.
Spot prices for UK milk have plunged to just 15p/litre, with as much as 12m litres of surplus milk washing around the UK this week alone that nobody wants.
Over the weekend, a number of milk suppliers to Freshways, the UK’s largest independent dairy processor, were forced to dispose of thousands of litres of milk due to a delay in their being milk collected.
Freshways said it was unable to collect milk from all its suppliers due to staff absenteeism as a result of the COVID-19 virus.
Freshways, which processes over 300m litres of milk every year at its London plant, slashed its milk price by 2p/litre last week and is now paying farmers just 24p/litre for milk.
As a dairy business, Freshways is heavily reliant on food service customers in London, with about 40% of its sales coming from coffee shops, restaurants and hotels, which are all now closed due to the COVID-19 pandemic.
Meanwhile, Cumbria dairy processor Meadow Foods also cut its liquid milk price to just 24p/litre after it lost a major contract supplying 150m litres of fresh milk to Arla.
Dispose
In Scotland, family-run dairy processor Grahams Dairy has also been forced to dispose of unwanted milk at two of its processing sites.
Grahams' predominant route to market is through supermarkets, but it still derives 20% of its sales from food service customers.
As a result, the dairy processor said it had incurred huge financial cost by skimming and dumping milk at two of its plants in Scotland.
In a frank and honest letter to milk suppliers, managing director Robert Graham said he had “significant concern” around the company’s ability to pick up milk from farms this week.
“Once 'lockdown' arrived, 1,500 accounts such as restaurants and coffee shops closed. Although some of this volume went into retail, what we are now seeing in retail is a hangover from stockpiling; people visiting stores less often, leading to reduced volumes; and some categories such as Skyr and Cottage Cheese being affected severely due to customers shopping faster and only purchasing 'essentials'. This has thrown out our milk balance versus incoming milk and we have serious concerns around finding homes for it as there is currently no capacity in the UK,” said Robert Graham.
In a bid to reduce costs, the Scottish milk processor said it had temporarily closed two of its milk plants and had temporarily let go (furloughed) up to 10% of its staff. Grahams also cut its liquid milk price by 1p/litre to just 24.5p/litre.
“If this lockdown continues into peak production, there will be significantly more pain as we will then have to take both further action on pricing as well as severe measures on those who have increased volumes versus 2019,” said Graham in his letter to milk suppliers.
Different story
It’s a different story for dairy farmer suppliers to larger UK milk processors.
While milk suppliers to smaller- and mid-sized UK dairy companies are enduring a very difficult time right now, the larger players in the UK dairy industry have been able to hold, or in one instance even increase, milk prices.
Arla, the largest processor of liquid milk in the UK, held its milk price for April at 30.8p/litre for manufacturing milk and 29.6p/litre for liquid milk.
First Milk held its April milk price at 27.6p/litre for manufacturing milk and 26.75p/litre for liquid milk, while Saputo (formerly Dairy Crest) held its April milk prices at 28.7p/litre for manufacturing milk and 27.6p/litre for liquid milk.
In a real surprise move, Muller actually increased its April milk price by 1p/litre to 27.25p/litre.
Muller, which manufactures a range of well-known consumer dairy products and primarily sells through supermarkets, said it had increased its total output significantly over the last month in order to meet the spike in retail demand.
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