The rapid increases in milk prices over the last 6-12 months might seem like good news for dairy farmers in the UK, but this doesn’t tell the whole story. In this article we discuss how this, and other factors are impacting the finances of dairy farms.
As a dairy farm consultancy, Douglas Green has always been in favour of higher milk prices. After all, higher prices mean greater margins and more revenue for dairy farmers. Incredibly, and unexpectedly, however, non-dairy alternatives are appearing on supermarket shelves at lower prices than milk.
According to Bloomberg*, 2 pints of milk now costs £1.25 on average, compared to £1.05 for a litre of soya milk, £1.07 for almond milk and £1.24 for oat milk,
Does this mean that milk substitutes are taking over, with milk becoming the secondary option as people flock to “modern” alternatives? Or is the higher price of milk a sign that cows milk is now the trending, must-have ingredient for teens, TikTokers and cosmopolitan city dwellers?
In reality, it’s too soon to tell, and in the short term, it’s probably neither.
Milk demand outstrips supply
With COVID and the war in Ukraine, milk demand has outstripped supply and the cost of milk production has increased. The net result is higher milk prices.
The number of people consuming non-dairy alternatives might be growing, but it’s still a much smaller proportion compared to those who consume cows milk, and the majority of consumers who are used to dairy products are likely to continue to use dairy milk, as this is what they are used to.
Better margins for dairy farmers
The costs of milk production have certainly increased for UK dairy farmers but in the long term, costs and supply-demand issues should stabilise which could lead to better margins for farmers, and potentially non-dairy alternatives becoming more expensive again.
In the short term, dairy farms that can keep their costs under control can benefit from the higher prices. To do this requires an audit of the different costs to see where savings can be made and, while certain costs such as cattle feed can’t be reduced, there are always process and production areas where costs can be trimmed.
If you are a dairy farmer then make sure to get help from experienced dairy farm consultants such as Douglas Green to explore how you can manage your costs and increase profit margins for your milk production.
Your milk production advisors
If you are concerned about the revenues and profit margins in your dairy farm, make sure you contact our milk production advisors at Douglas Green. We would be happy to have a free initial chat with you over the phone to see how we can help. Call our dairy farm consultants today.