Scottish dairy sector ‘on a knife edge’

With more than 125 responses, the survey provided an excellent snapshot of the state of the sector in Scotland – and more than 60% of dairy farmers who responded said they are ‘not so confident’ or ‘not at all confident’ about the direction of travel for the Scottish dairy industry. Just over 15% said that they were ‘extremely confident’ or ‘very confident’.

However, there were some mixed messages. Around 30% of respondents said they have ‘no confidence’ to invest in the short term but the same proportion say they are ‘very confident’ or ‘confident to invest’, with a further 40% falling somewhere in between.

That led the survey’s authors to state that confidence levels can easily swing one way or another, depending on what happens with regards to future agricultural policy and the milk price – and note that both Government, and milk buyers therefore have a role to play in those confidence levels. When compared to 2016, when milk prices crashed, a third of respondents said that their businesses were stronger, but two thirds believed their businesses were unchanged.

Looking to the future, a third of farmers are now intent on expansion, mostly by up to 10%, but two thirds of farmers will keep output the same. Only 7% were looking to cut production volumes. Based on those results, it looks as if milk volumes in Scotland will continue to grow.

There was also reasonable optimism among farmers for life post-Brexit. Some 60% stated that their businesses will be about the same or better off after Brexit.

Summarising the survey results, Kite Consulting’s senior advisor in Scotland, David Keiley, said: “Scotland has a very polarised milk field, with some farmers getting very good milk prices but most aren’t.

“A lot of businesses have been cash negative for a while, and that is putting a lot of pressure on them. Many are on a knife edge currently having to deal with increasing overdrafts, higher levels of debts per cow and creditor burdens,” noted Mr Keiley.

“Whilst we have very efficient businesses in Scotland, the survey results reflect the position of the Scottish dairy industry and the need, going forward, to determine a clear strategy for the future in light of the present challenges facing dairy farmers.”

NFU Scotland’s milk policy manager Stuart Martin, who also runs the Scottish Dairy Hub, said: “The survey and its results are significant and have implications for the whole supply chain in Scotland and the many stakeholders that engage with Scottish dairy farmers.”