Current Solutions as collated by Ian

The goal is to remove the surplus distressed milk from the market immediately. Please remember this milk is sloshing around as a direct result of the measures taken by government on a market which is unable to adjust at the speed the chaos has snook up on us.  

Ian is not suggesting the government was wrong in making the decision it did to close down the Food Service sector but it has to be pointed out that move has resulted in the current chaos.

So below is a selection of the solutions on offer. You may have others in which case email Ian

1. Pay affected farmers to cull cows as part of a temporary out goers’ scheme, assuming the meat plants can take the extra tonnage. Ian has briefly looked into this and capacity at slaughterhouses is more or less a given with the option to work extra shifts and Saturdays if required. That leaves one problem, what to do with the cow beef and where to sell it with no export market and prices already well back.
2. Fast forward the planned BPS golden handshake/out goers’ scheme and/or introduce a voluntary outgoes scheme for those worst affected as suggested by Kite consultancy.
3. Leave it to individual farmers to claim any milk dumping losses from their farm insurers. Note the NFU Mutual's policy only covers farmers for a maximum 7 days of dumped milk and some policies don’t cover any such claims.
4. Implement market support measures including government to buy the distress milk and pay farmers to dump it at 15p to 25p and / or place it into AD plants
5. Intervention and/or private storage aid until normality returns.  Intervention is open now and available to the UK and would take butter and SMP at a price equivalent to 19ppl but is subject to strict limits on tonnage accepted. The problem with this is that it simply delays recovery only for the problem to be faced at a later date.
6. Pay the full price for a percentage of the milk from the genuinely and seriously affected processors based on 2019 production figures. i.e. the excess or so-called B litres to be disposed of. This would be a processor set figure. This is Ian’s favourite at the moment but in preferring this option he assumes the A price will remain sensible and reflect the processors normal non-food service business milk price he can pay.
7. Processors to continue to extend payment terms alongside price drops and instructions to dump milk on farm. This is non-tenable. A disaster.
8. Put surplus milk into cheddar. This will give the cheddar market a hangover and its paddling its own canoe successfully at the moment and doesn't need to be dragged into this mess.
9. Farmers agree to voluntarily cut production by x%, or are told to do so.  This will affect production and milk supply later in the year and we all know how easy it would be too get three neighbouring farmers to agree let alone thousands so it has to be compulsory and processor led.
10. Reduce cost, maintain or increase margin and cut milk output by maximising milk from grass for those who don’t already do so.

 The issue with most of these options is that the problem is here today and most of these solutions will simply take too long to implement. Yes, individually and collectively they are likely to stabilise the farmgate milk price and reduce the disruption. All the distress milk needs to be taken out of the system but how quick can it be done? The last thing we want is for this milk to drag down the whole market and destabilise prices which is the direction it is heading today.

On a daily basis processor in the so-called middle ground and smaller operators and not collecting milk from farms, dropping farm gate milk prices and/or introducing A and B pricing at short notice.

It’s clear from Ian’s discussions that some processors are trusted by their farmers more than others and some aren't trusted at all. Any scheme or solution involving any financial package will need to be backed up with good due diligence and evidence that the processor has lost orders to COVID-19. 

If a processor is up front, honest and transparent with their producers I suspect most will understand, however the track record in this department is not good in some cases.

The shortage of liquid milk in retail stores is down to consumers erratic and unpredictable buying patterns. At processor level, one or two processors involved appear to be genuinely concerned and actively considering the fairest thing to do for all involved e.g. farmer suppliers and the processors is to move to weekly farmgate milk pricing. 

 Finally, we are not alone! GB milk producers are not the only ones told to dump milk due to a sudden drop in demand.  In the US it’s a mirror image with claims that a staggering 10% of current US farmgate milk output has no home or market.