BY JIM WEBSTER
Now things are starting to unravel at speed. Looking at livestock, which is what I know best, sheep prices have tanked. In simple terms because like us the French and the rest of our customers are locked down, they’re not dining out and the amount of lamb they’re eating has dropped.
Beef is the same. Butchers are struggling to shift the better hindquarter cuts, the steaks and roasts. This is because a lot of people eat them, but they eat them in carveries and other catering outlets.
Milk is in deep trouble. The big hit comes from Costa and the other cafes closing. In this town, one not especially large coffee shop used 50 litres of (cows’) milk a day. I know some of their customers and am in contact with some of them. They’re drinking the same amount of coffee but they’re not having the number of lattes they used to.
Obviously there are other factors causing the dislocation, people with stockpiles of milk in their freezer, people who cannot get out to buy milk, and all these things are bouncing off each other making things worse.
The spot price for milk was running at 30p a litre before places like Costa were closed. It then dropped sharply to 15ppl. I heard today prices are at 5ppl and 10ppl. Apparently skimmed milk powder and skimmed milk are being poured into anaerobic digesters.
To quote Ian Potter, who knows a fair bit more about this side of things than I do,
“Processors’ cash flow budgets have been blown up and whilst some are clearly very worried over long term farm supply base, they either take mitigation steps in conjunction with their farmers or risk shutting up shop. Most liquid processors Ian has spoken to are having to ditch the code one-month price movement notice period and review the situation almost on a daily basis with several stating “I am working to avoid the Freshways approach”. For sure, sadly some businesses will be casualties. This will have very serious long-term consequences and it is starting to feel very painful and time to buckle up and sadly for some it won’t be a case of can I find a new milk purchaser, more can I find a buyer for my cows.”
Another issue is that apparently a lot of companies are talking about ‘delaying payment’.
Now I know I’ve got a lot of non-farmers reading this. But ‘milk cheque day’ is sacrosanct. Dairy farmers get paid for their milk a month in arrears. So you’ll get your cheque for March about the 18th of April. (Depends on weekends etc.) All companies seem to stick with the same day they inherited from the Milk Marketing Board. This is one of the underpinnings of the industry. A lot of supply companies try to send the bill out – not at the month end, but so it lands on the kitchen table the day before the milk cheque. Also a large proportion of dairy farmers will have a lot of standing orders/payments which go out two or three days after ‘milk cheque day’. This can take anywhere from 25% upwards of the milk cheque. So if the company delays payment the farmer has to contact finance companies and others to frantically delay payments or get an unapproved extra overdraft. But for a lot of tenants, the overdraft is fixed at twice the milk cheque. So if the price of milk falls, so does the overdraft the bank is willing to lend. This is known as lending you an umbrella but taking it away when it starts to rain. A lot of dairy farmers could be in trouble very rapidly. For some the midden could hit the windmill about the middle of this month.
Now what’s the issue? In reality the problem isn’t the virus as such. I’ve probably had it, my lady wife certainly has. The problem is the necessary steps taken to cope with the virus. I’m not knocking the lock-down. We have to keep the number of cases down to a level that the NHS can cope with.
The problem is that our usual routes to market are blocked. It’s like the picture above where a stream was blocked. Food is building up at one side of the blockage, and eventually it’ll get short at the other side. But just as when the beck gets blocked, water does eventually find a way around. In a while the water finds its way round the obstacle and largely goes back into its old course.
Our problem is that the workarounds are going to be less good than the old route to market. If the price of hindquarter beef falls, are more consumers going to be tempted to cook it at home? Will they turn to lamb, or drink more milk in their tea?
The obvious solution is actually to get the beck unblocked as soon as possible, or we’re going to be left with a nasty muddy mess as everybody paddles about in the muck trying to sort things out.
Jim Webster farms at the bottom end of South Cumbria. Jim was encouraged to collect together into a book some blog posts he’d written because of their insight into Cumbrian farming and rural life (rain, sheep, quadbikes and dogs) It’s available here.