Dairy Dialog weekly podcast: The impact of drought

By Jim Cornall contact

- Last updated on GMT

Adverse weather in the UK and some parts of northern and western Europe have led to drought-like conditions that have affected milk production.

In recognition of this, some companies, such as First Milk, have increased their September milk price, in its case, by 0.5 pence per liter.

Jim Baird, farmer director and vice chairman at First Milk, said, “We appreciate the additional costs that members are experiencing due to the adverse weather conditions and I am sure this increase will be welcomed in facing these challenges. Whilst there continues to be conflicting messages on the overall market direction, we remain focussed on growing our business and passing the benefits of this back to members.”

NFU calls for government help

The UK’s National Farmers’ Union (NFU)has appealed to Secretary of State Michael Gove to assist farm businesses still suffering from the impacts of agricultural drought, saying they have seen little Government action since the NFU’s emergency summit on August 1.

NFU president Minette Batters, said governments in Scotland, Wales and some across Europe are showing understanding of the severity of the agricultural drought and have put in place measures to assist farm businesses to help with the dire impacts. For farmers in England, she says, the situation is very different.

Batters said, “We admired the Secretary of State’s words of reassurance when he attended the NFU’s agricultural drought summit last month, but we are yet to see meaningful assistance to farmers who have to deal with the long-term impacts of the extreme weather.

“We have prompted the Secretary of State to, as a priority, be flexible on CAP greening rules and agri-environment schemes. These rules and schemes, as it stands, mean many farmers can’t graze or cut grass from certain areas of land. But Government can apply to the EU Commission for a derogation to allow farmers to graze or cut grass from this land temporarily.

“Without these derogations, farmers face huge uncertainty over whether feed stocks will last the forthcoming winter and what increasing costs they will be facing if they don’t.”

Winter shortfall

Batters also called for additional flexibility on water abstraction licensing, support for additional forage and bedding costs and improved cashflow, including speeding up overdue payments for hundreds of farmers expecting the cash injection.    

“The Secretary of State said he would do ‘whatever it takes in order to make sure farmers can continue to run successful businesses’ after the summit last month. A bit of rain does not wash the problems away.”

New results from a survey of over 600 NFU members on the impact of the drought show 71% have suffered a negative impact from the weather. More than 78% of farmers using forage expect a shortfall in feed reserves this winter. And of the farmers growing spring crops, 90% say they are growing poorer than expected.

However, it’s not just in parts of Europe that drought has been a major issue.

Calls for levy

In Queensland, Australia, the Queensland Dairyfarmers’ Organisation (QDO) says the dairy industry there is being hit hard by drought, and is calling on consumers to sign a petition​ asking for a 10 cents per liter levy, and for processors like Parmalat, Norco and Lion to guarantee that the full 10 cents goes back to the famers.

QDO reached out to Kyogle dairy farmer, Shane Hickey, whose social media post on being paid A$2.46 (US$1.77) per hour went viral with more than 4m views to drive awareness for the campaign.

Podcast launch

DairyReporter is launching a weekly podcast, Dairy Dialog, which will look at trends, issues, products and the dairy industry in general, and this first episode is on the drought issue.

We speak with chairman of the National Association of Danish Milk Producers, and the European Milk Board’s representative in Denmark, Kjartan Poulsen, as well as Paul Macer, from Kite Consulting in the UK, about the problems associated with the drought many have endured in 2018, whether it’s a pattern that will continue, and also what can be done to mitigate against losses from such events.

Kite Consulting, based in the UK, published a report​ looking at the different scenarios facing the UK dairy industry based on the severity of the drought, and when it would end.

The scenario whereby the weather normalized in August, with a probability of 55%, would mean silages already made will be fed early, a loss of one to two cuts of silage, straw/bulk feeds will continue to increase in price, more concentrates fed to counter reduced forage supply, and an impact on the cost of production for farmers of at least 2pence per liter.

As you will hear in the podcast, Macer says the impact won’t be felt until the first quarter of 2019, and he also explains how another drought, and Brexit, may affect the remainder of 2019.

Also in each weekly podcast, we will take a brief look at the global dairy market with INTL FCStone Inc’s Liam Fenton. INTL FCStone provides clients across the globe with a range of customized financial services and tools to help them protect their margins and manage volatility.

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