Despite having 2.2m dairy cows, the United Kingdom is a major dairy importer, buying in over 110,000 tonnes of cheddar cheese alone last year. Ireland is the leading supplier, accounting for around 80% of last year’s total cheddar cheese imports. At 88,000t, it is our number one market destination.

The Irish Dairy Board (IDB) is our main exporter and holds the number two brand in the market, Pilgrims Choice. However, it is well behind the clear market leader Cathedral City, owned by publicly quoted Dairy Crest.

The IDB run the UK’s largest cheese packing facility and are the leading player in packing supermarket own-label cheddar lines.

The southwest of England is traditionally the home of cheddar cheese production. A recent study tour from the Agricultural Science Association (ASA) visited two farm-based cheese producers in the southwest – Wyke farms, that produce 14,000t of cheese per year and Lye Cross farm, that sell 4,500t.

Both are family farm-based operations that are now processing significant milk volumes – 130m litres in the case of Wyke Farms and 36m litres at Lye Cross Farm. For comparison purposes, that would make Wyke Farms similar in scale to Tipperary co-op in Ireland.

It is the heart of cheese country and a region that has exclusive entitlement to use the term “West Country Farmhouse Cheese”. The Lye Cross Farm cheese business is just seven miles from the famous village of Cheddar in Somerset. It is run by the Alvis brothers, Peter and Johnny. The business was founded by their grandfather and their father John still chairs the board.

The Alvis brothers run a very significant farming operation of 4,500ha. They milk 1,200 cows on three different farms, including 250 run on an organic system. Lye Cross farm also has 600 beef cattle and finish 16,000 pigs. Meat and cheese is sold through their own farm shop.

Peter Alvis, who runs the cheese business, explained that they buy milk from 27 other farms and also purchase an additional 10m litres on the open market. In total, around 36m litres of milk is processed per year, with cheese sales of around 4,500t annually.

Their cheese is mostly sold under supermarket own-label in Britain and in branded format on international markets. Around 40% of cheese sold is organic, with 60% conventional. Approximately 25% of sales is exported to 30 countries.

Organic cheese sales suffered in the recession, but are recovering well now. “Organic sales returned to growth in the first quarter of 2013 and we have massive enquiries for organic export,” Peter said.

Lye Cross Farm supply cheese to Sainsbury’s, Aldi, Morrison, Asda, Waitrose and Marks & Spencer.

Of their retail sales, about 80% is sold in retailer own-brand format, although there is some secondary branding that highlights where the cheese was produced. Meeting the demands of retailers is not easy. “We have had 12 audit visits in the first 16 weeks of the year,” Peter explained.

Britain is an exceptionally competitive retail market. Peter highlighted the difficulty in achieving good sales volumes even when you are on the shelf. “The market leader, Cathedral City, was on special offer for 70% of their sales last year,” he said.

Cheese production is also heavy on working capital, as it must be stored for a number of months to mature. He explained that finance, rather than markets or milk, was the main limiting factor facing the business. “Every 1,000t of cheese costs an extra £3.5m to finance,” he explained.

Over £15m has been invested in the business in the past decade, including state of the art facilities at their £2m Regilsbury dairy, which runs 650 cows. It is a stunning facility, with all animals and milking facilities under one roof. Some of the herd were housed by day when we visited in June.

To grow output from Regilsbury, the Alvis brothers are considering running a herd of Jersey crossbreds that would be milked once per day. “The farm is two miles long and three quarters of a mile wide. We would envisage this herd walking long distances to the far end of the farm,” Nick Green, farms director at Lye Cross, explained.

As well as bringing milk with high solids, the new herd would ensure better utilisation of the facilities on the farm, which includes a 40 bale rotary Dairymaster parlour. They envisage out wintering the herd on forage rape on a dry outfarm.

A key observation from the short trip to the south west of England was that milk production costs were typically 32p/litre, 40c at the current exchange rate.

Nick admitted that costs were too high. “Purchased feed cost last year was 8.7p/litre, we need to cut that to 7p,” he said. The farm sells 7,200 litres but needs to deliver 8,000. “Vet costs are 2.86p but need to be closer to 1p,” he said.

There is a routine weekly vet visit for herd health planning. However, their biggest health issue, TB, is one that he feels powerless to do anything about.

“One farm or another has been shut down at various points in the past 12 years. Recently, we had 48 reactors in one herd. It is a big issue for the industry. We have 1,600 livestock here – testing every 60 days is a huge demand on labour,” he said.

He estimated that TB has cost the business £0.5m in the last five years. The scourge of TB was a common theme from every farmer that we met.

Nick was full of praise for Dairymaster’s milking technology on the farm. The MooMonitor heat detection system has recently been tested on the farm “and exceeded their claims”, he said.

Whey from the cheese plant is filtered and sold to Barbers in Somerset, which, incidentally, is a plant run in a joint venture with Cork’s Carbery Milk Products. Waste from the cheese business is currently fed to the pigs, but that is likely to change.

Peter Alvis pointed out that lactose from the cheese plant is worth 3p/litre as a pig feed, but would be worth an estimated 9p/litre as an energy feedstock for a digester.

He said that they are considering a joint venture to build a digester, in which their partner would operate the digestor and Lye Cross would take the energy and the heat to reduce cheese production costs.

When Peter was asked about the challenges of succession in a family business, he was very honest and said: “We know only too well the issues. This business was founded by my grandfather and his brother. They ended up in court and never spoke again”.

Succession planning was agreed a few years ago and there are clearly defined roles for each family member involved in the business. “Johnny concentrates on the farm and I look after the cheese business,” Peter said.