Livestock Farming’s Money Drain

BY JIM WEBSTER

A young farmer was chatting with me the other day. An old chap had told him that when they wanted to buy a new tractor they sold three new calved dairy heifers. The young farmer wanted to know if this was true.

The answer is, yes, it was true. Admittedly his informant bred damned good cows, and the rest of us might have had to sell four heifers, but still. The problem for the young chap was that to buy an equivalent tractor he’d have to sell between fifteen and twenty dairy heifers. The reason is that tractor prices are linked to the general economy, dairy heifer prices are linked to the price of milk.

In agriculture we’re regularly told that we cannot rely on handouts from the state, we have to become more efficient. So I decided to explore the roots of our industry’s inefficiency…

Looking at milk first, because that’s what I know, we started milking in 1965 and we still have our first milk cheque. We sold 1822 gallons to the Milk Marketing Board, for the princely sum of 28.77d per gallon. That is in modern terms about 12p per gallon or in even more modern terms, 2.64p per litre.

Now then, my late mother-in-law was a remarkably organised lady who jotted down in a notebook exactly what she paid the milkman. In June 1965 she was paying him ten pence halfpenny per pint. This is 84d per gallon, or 35p per gallon. That, to keep a la mode is 7.7ppl.

So in simple terms the customer paid their supplier three times what the supplier paid the farmer. But then they got the milk delivered to their door every day by an environmentally sustainable electric vehicle in a reusable container. The empty container was taken away for them at the same time.

Now let time roll onwards a bit and we come to financial year 1995/6. Checking through each of the twelve milk cheques we got for that period, we were paid an average price of 24.335ppl.

In 1995 government statistics say that the retail price for milk was 36per pint or 63.35ppl

Today our current price is 24ppl.

If I go to Tesco and buy four pints of milk, it costs me 109p or 48ppl (or so it boldly proclaims on the shelf.) So now the consumer only pays twice what the farmer gets, but of course they have to carry it back from the shop themselves and the container cannot be immediately reused (and you have to carry it to the recycling centre.)

But what about inflation? What is the spending value of a pound? Well a pound in 1965 bought as much as £10 in 1995 and £16.56 today.

So rather than earning 24ppl, the dairy farmer ought to be on 40ppl to keep up with inflation.

1995 was a significant year, it was the year of the 1995 Agriculture act. Pushed through by the Conservative party, one thing it encompassed was the death of the Milk Marketing Board. To simplify history and paint with a broad brush, British dairy farmers, faced with being picked off by the dairy industry, formed another co-op, Milk Marque. Membership was extremely high, probably well over 90% of dairy farmers joined. This obviously didn’t suit our political masters because the Competition Commission was called in and it insisted that Milk Marque should be broken up. There was argument at the time that the Commission had overstepped its remit as in this case competition was an EU issue not a UK issue and Milk Marque was not a threat to competition on an EU basis. As the BBC commented, “[The Labour] government announced a shake-up of the milk supply industry in July to prevent Milk Marque, the major supplier, from exploiting its monopoly by manipulating prices.”

If by manipulating prices it meant ensuring farmers in point of fact got a fair price, then it was probably guilty as charged. But with the break-up of the co-op, our two main political parties basically threw dairy farmers to the wolves. So if anybody asks why UK dairy farmers don’t form co-ops, the answer is, we do but governments destroy them.

Lamb

Now back in 1965 we had some sheep on the farm. We made a living off 17 cows and 60 ewes. My father sold lamb, dead weight, for 3 shillings a pound, 15p per lb which is 33p per kilo. For comparison, I was sent the Hill Farming Research Organisation Farm Reports and Flock Record for the year ending October 1965. So it looks as if my Dad’s price was about reasonable.

The current farm gate price for lamb (from the AHDB website) is 470p per kilo.

Looking for consumer comparisons is trickier than for milk. So I picked for a comparison Lamb Shoulder, with the bone in. They didn’t start keeping prices for it until 1968 by which time we’d stopped keeping sheep but I feel the comparison is fair enough. Sheep producers are doing not too badly. They’re getting 86% of what they got back in 1965 compared to dairy farmers are only getting 60%. The consumer price for lamb has also remained about the same, consumers are paying 103%. The difference is largely in the pockets of the retailers.

Beef

Then we have beef. My Father didn’t sell many bullocks, and he actually received the same price per pound as he did for his lambs. So I got a current price for beef of about the same quality off the AHDB website, and for the consumer, I picked Beef Rump steak because it was one of the few things with a price recorded through the period. Allowing for inflation, farmers are getting 67% of what they were in 1965. Consumers are paying 78%.

Why have beef and sheep suffered less than dairy? Bad to say, I’m just guessing. If I’d got figures for pigs and poultry they would have shown farmers having an even harder time. Their problem is they’re ‘efficient’ and the major retailers have pretty well got them under control. Dairy was screwed by a political decision. Beef and sheep are far less ‘organised’ and ‘efficient’. I remember one major supermarket buyer commenting at a meeting that they expected to do to beef and sheep what they’d done to pigs and poultry. In his words, “The learning curve was so steep we effectively ran into a brick wall.”

Sheep marketing is so ‘old-fashioned’ and ‘inefficient’ that the retailers haven’t been able to take control. As a result the sheep farmer keeps more of the end price. This is probably why the multiple retailers don’t push lamb.

There are consequences to all this pressure on farmers.

In financial year 1965/6 my father, in his first year as a tenant farmer, showed a profit of £1562 17s 8d. Allowing for inflation that is the equivalent of £24,304. This was off 17 milk cows and 60 sheep on 72 acres.

We can look at how much money has been sucked out of the industry. Assume a hundred-acre farm milking a 100 dairy cows each giving 7000 litres a year, a total of 700,000 litres.

There is a 15.74ppl deficit on every litre compared to the 1960s. That is over £110,000 sucked out of the business. In comparison, the Basic Payment Scheme payment to a farm of that size will be £9422. Now you can see why my Grandfather could afford to employ three full time men and a lad. That meant that hedges could get trimmed by hand and laid every few years. It meant that walls could be kept up.

There are further implications.

The modern dairy farm must be seriously efficient to survive. So the cows have to be happy and comfortable. The problem comes when it rains. The cow is neither happy nor comfortable and her milk yield drops like a stone. Because of the tight margins dairy farmers now habitually work to, a lot of them are being forced to look at whether they can afford to let cows graze outside, rather than have them inside all the year round. Talking to one, he calculated that if somebody wanted him to revert to a traditional grazing pattern, they’d have to find him a 1.5 pence per litre grazing supplement to cover his extra costs.

Then there is the machinery issue. I started off this article by pointing out how expensive machinery is in real terms. So more and more farms fall back on contractors. The contractor makes his money by doing as many acres as possible during a day. After all when making silage for his clients, he could have half a dozen farmers waiting for him and only a limited window of dry weather. He needs a big forage harvester, large trailers and serious tractors capable of both pulling and braking the trailers. It’s the same with slurry. Not only do you have the pressure of weather and season, you have EU regulations saying when you can and cannot spread in some areas. So the contractor that turns up on the farm might be expecting to empty your slurry pit in the morning, do another farm in the afternoon/evening. So he needs a bigger tanker which therefore has wider wheels, so it does less damage and an even bigger tractor to pull it. So if you dislike the huge tractors roaring around the lanes, now you know why they’re there. To make a living, a contractor has to have the biggest kit they can afford the finance on.

Also remember that this all happened when we were members of the EEC/EU. You know, the bunch that ‘featherbeds’ farmers.

Indeed Article 39 of the Treaty of Rome reads,

“ARTICLE 39 1. The objectives of the common agricultural policy shall be:

(a) to increase agricultural productivity by promoting technical progress and by ensuring the rational development of agricultural production and the optimum utilisation of the factors of production, in particular labour;

(b) thus to ensure a fair standard of living for the agricultural community, in particular by increasing the individual earnings of persons engaged in agriculture;”

There are other objectives, but we’ll stop there. It’s obvious Article 39 was something the EU haven’t taken seriously for a while.

We live in hope.

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, quad-bikes and dogs) It’s available here.