After nearly two years of low milk prices, the recent upturn in dairy markets is already having a positive impact on the mindset of NI dairy farmers.

The results from our survey of milk producers at last week’s Winter Fair show that dairy farmers are again thinking about expansion within their businesses. As shown in Figure 1, over 50% of survey respondents this year indicated that they are now looking to expand, compared to only 32% when we asked the same question in 2015.

The 2016 figure is similar to our findings in both 2013 and 2014, two years when milk price averaged around 30p/l, although behind the results in 2011 and 2012, when 66% and 58% of dairy farmers respectively indicated that they intended increasing the amount of milk produced.

Back then, the short- to medium-term prospects for milk prices were perhaps stronger than they are now, but after the recent prolonged downturn, it would seem that some producers are keen to catch up on lost ground.

However, there is also a strong sense of realism as to where farmers think price is heading in 2017. As shown in Figure 2, the vast majority of respondents (74%) indicated that they expect to receive a milk price of between 24 and 28p per litre through 2017. Only 6% think the average price might go higher than this, while 18% are more pessimistic, and predict an average price of between 20 and 24p per litre.

When we asked the same question in 2015, a total of 75% of respondents predicted an average price throughout 2016 of between 20 and 24p per litre, with 23% predicting prices below 20p. Once November and December 2016 prices are added in, it looks like the 75% might be correct in their prediction, but only just, with NI prices in 2016 probably set to average just over 20p per litre.

Debt

Perhaps one surprise from our survey is that just 38% of dairy farmers indicated that they were now in more debt than one year ago. That is similar to the answer we received in 2015 when we asked a similar question.

This probably suggests that the main response to low milk prices has been to put spending on hold. It also highlights the resilience of the family farm model in NI to withstand periods of low prices. However, as in any business, re-investment can only be put on hold for so long before it has a negative long-term impact.

Listen to Northern Ireland dairy farmers at the Winter Fair in our podcast below:

Listen to "Gauging the mood of Northern Ireland dairy farmers" on Spreaker.

To judge this, we asked farmers what milk price they now need to make their business financially sustainable. The responses received ranged from 15 to 35p per litre, although the average of 25.02p per litre, was similar to that received in 2015 (average of 24.6p per litre).

No change to production systems

Of the farmers who completed our survey, 48% said that they operated a medium input system with 6,000 to 8,000 litre cows.

A further 35% had a high-input system with cows over 8,000 litres and 17% worked with cows producing yields under 6,000 litres.

Just under 70% indicated that they do not intend making any changes to their production system in 2017.

Of the remaining 30%, the majority indicated that a change to their production system in 2017 would involve getting more fresh grass into cows, or improving their milk output from forage.

Some also said that they intend tightening up their calving pattern.

Farmers open to fixed price schemes

With a number of milk buyers in NI now offering fixed price schemes, and others expected to come on board with schemes through 2017, we tried to gauge the attitude of farmers.

Crucially, our question was whether farmers were interested in signing up to fixed price schemes that “deliver average market returns”. The basis for the question is that ultimately, the experience from fixed-price schemes elsewhere is that farmers who sign up only ever receive the same average price over a longer-term period as those that don’t. The difference is that some of the extreme peaks and troughs in price are removed.

Of our survey respondents, 19% were already signed up to fixed-price schemes, 56% said that they were not in a scheme, but were open to the idea, while just 24% of farmers said that they were not interested.

No consensus on future support to farmers

Our final question asked dairy farmers how they think government should support them after Brexit.

Given the lack of clarity on just what might be available from the government in future, it is perhaps not a surprise that there was no real consensus on a possible way forward.

As shown in Figure 3, there was equal support for three possible alternatives:

  • Continuing with area- based payments.
  • Financial support on each litre of milk produced.
  • Insurance schemes that pay out in times of low milk price.

    • Of note was that only 14% of respondents favoured offering no financial support at all to farmers in the future, which is probably a reflection of the two years just gone when direct payments have been a very important part of farm incomes.

    IFJ hamper winner

    Thank you to everyone who took time last week to complete our survey.

    Everyone was put into a draw to receive a selection of merchandise from the Irish Farmers Journal. The winner was David Miller from Claudy, Co Derry.