OMSCo looks to the future

Independent agricultural economist Séan Rickard warned that the dairy industry must face the reality of global markets and the price volatility that goes with them, at the Organic Milk Suppliers Co-Operative (OMSCo) Positive Dairying Conference in Birmingham, UK recently.

Focusing on the future decisions for those in the dairy industry, he says, “UK dairy farming is now part of a global industry and is therefore subject to the vicissitudes of short term shocks to global markets, and longer term trends. Even relatively small mismatches between supply and demand lead large fluctuations in price. Surviving dairy farmers must learn to cope with greater volatility.

“The dairy industry, and particularly UK farmers, needs a new mindset: not only to deal with short term volatility, but also with the longer term global opportunities and sustainability challenges.

“Individual farmers have four options: the first is to leave the industry. The second is to adjust by increasing productivity and/or increasing returns, which is obviously only an option where the farm has the scope and ability to improve. Thirdly, they can adopt a buffer capability strategy whereby you are able to weather an input or output price shock without substantial change or, lastly, make a radical change by investing in horizontal or vertical diversification which is high risk and, in truth, only a few will succeed here.

“Worldwide, the underlying trend in demand for dairy products is expected to rise at 2% per year and the removal of EU quotas gives the UK dairy industry an opportunity. Remember, we have some of the best dairies in the world. This gives us enormous opportunities. Let’s take action now to get ahead.”

A debate was sparked between Niel Parish, MP for Tiverton and Honiton, and Heather Wheeler MP, chair of the All Party Parliamentary Group for Dairy, ended with a show of hands demonstrating a clear preference for staying in Europe for the long term.

“We mustn’t get obsessive about the short-term challenges,” warns John Giles, divisional director at Promar International.

“Obviously we need to manage our businesses accordingly, but we must not lose sight of the global opportunities. We can take transferable lessons from other sectors, see how they protect their brand, how they invest in R&D, consider how value, not volume, can drive a business and innovate.”