Wicked Leeks - A whole new world - Issue 3

SPILT MILK:COVID-19 AND DAIRY

Covid-19 sent milk prices tumbling and caused public shock at wasted milk, but the crisis in dairy is much more long-term.

Two weeks ago, Robert Mallett dumped

17,000 litres of fresh milk onto the ground of his 300-acre Wiltshire farm and watched itdrain away.

His buyer Freshways, one of the UK’slargest dairy processors, was one of manythat had temporarily halted collections asthe UK lockdown obliterated sales from thefoodservice sector (which makes up 40 percent of its business).

It was a move that affected dairy farmersthe length and breadth of the country. Only afew miles from Mallett, at JoJo’s Dairy, JosetteFeddes had been forced to do the same,dumping the bulk of the 6,000 litres producedeach day by her 250-strong herd. It was an“utterly desperate” act, she said.

The sight of fresh milk going to waste onlyweeks after supermarket shelves had satbare struck a chord. When Mallett uploadeda video of his milk gushing along the groundonline it was shared 750 times, attracting 300comments full of outrage and empathy.

But devastatingly wasteful as it mightbe, “two days’ worth of dumping milk won’tbankrupt me,” he says. “A year of milk pricesbeing way below the cost of production could.”Organic dairy has been even worse hit.Since the two biggest buyers of organic milk– Pret a Manger and McDonald’s – closed

Thousands of litres of milk have been poured away since the eating-out sector has been shut down.

their doors, many organic milk suppliers have also been forced to pour milk away or else sell it on the spot market far below the cost of production.

In a sense, the pandemic has only exposed the deep cracks and shallow margins that have plagued British dairy for decades.

According to Defra figures, the average price paid for liquid milk to farmers in 2015 was 24p per litre – the same price paid in 1995. That’s despite 20 years of inflation pushing up the costs of many goods and services by about 70 per cent in the same time period.

On the one hand, the value placed on milk has suffered as a result of a fierce price war between UK supermarkets. In 2015, the average price of a four-pint carton famously dipped below bottled water, selling for just 89p in some cases.

At the same time the supply chain has consolidated. Around 90 per cent of fresh milk is now processed and sold by just seven companies, according to Defra. That places significant power in fewer hands.

The knock-on effect has been huge volatility in the prices paid to British dairy farmers. It’s thought about half have given up their business in the last 20 years as a result. Many have protested at the supermarkets they blame for driving down value: one memorable

The optimistic me thinks that this pandemic might lead to a greater understanding of the food supply chain. Or will it just go back to what it was before?

The dairy sector is largely controlled by supermarkets and milk processors.

stunt in 2015 saw bemused cows released towander up and down the aisles in Asda.

“Coronavirus has exposed the fragility andinflexibility of our modern business model,right across the spectrum,” says David Finlay,owner of The Ethical Dairy, which producescheeses and ice-creams from its farm inScotland. There are “larger and larger farmswith less and less share of their productvalue due to the increasing control of theirinput and output supply lines by fewer, largercorporates.”

Mallett says that 1997 was the last timehe can recall turning a profit at his farm inHighworth. With each cow costing around£5 per day to feed and shelter, he needs 25pper litre to stay afloat. The impact of Covid-19pushing that price per litre down muchfurther could well be the tipping point.

It isn’t looking good. Two weeks sinceimages of milk dumped on farms hit theheadlines, milk is now being collected and

sold by processors, but prices have suffered. Freshways, Graham’s the Family Dairy, Dairy Partners, and Pensworth have all cut prices. Medina Dairy cited “significant and unprecedented commercial and financial pressures” as it cut 2p per litre of its May price to 23.75p per litre in early April.

That’s because even where production can pivot from coffee shops and airlines, to supermarkets and corner shops, that doesn’t allow processors to pay the same prices as before, explains Richard Lane, of The Dairy Group. Previously they would have gleaned extra value from each litre of milk by removing the fat not wanted in retail and selling it to foodservice clients as cream, for example. Finlay says 80 per cent of projected cheese sales at The Ethical Dairy were heading for foodservice, while its ice-cream business, which worked primarily alongside tourist facilities, “is effectively closed and facing liquidation.”

Following crisis talks between government and industry, environment secretary George Eustice this week announced support by way of temporarily relaxing competition laws. The move will allow greater collaboration and make identifying areas with spare capacity that much easier.

But these are short-term measures. In the longer term, the sector needs the public shock at images of wasted milk to convert into a greater willingness to pay a little more for British produce. Doing so could not only lift the supply chain out of financial dire straits, it could help address criticism of dairy’s impact on the environment, believes Lane, with fewer food miles from imports.

Resilience and sustainability can go hand in hand, believes Finlay. “Variety, self-sufficiency and waste reduction build resilience,” he says, which can leave producers better equipped to face the sudden impact of a pandemic. “In an increasingly disrupted world, large, complex businesses dependent on long chains of supply and delivery are way too fragile, which threatens our security in every sector,” he says.

Lane is hopeful: “The optimistic me thinks that this pandemic might lead to a greater understanding of the food supply chain, or a greater value placed on it. That might mean people are more prepared to pay a little bit more for a sustainable, domestic market.

“Or when this all blows over, will they just go back to how it was before?” Leaving dairy right where it started.