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A two-page spread providing advice to farmers who are anticipating giving up milk production in a advertizing sponsored farm magazine was probably a fair indication of the state of the dairy industry in the UK. It also indicated considerable courage by the publishers. (580 words)

The article was carried by the Farmers Weekly's Dairy Update which is mailed to anybody who fills in the Farmers Weekly customer profile when renewing their annual subscription and puts a tick against dairy cows.

Surely there is always a steady stream of farmers retiring, but they are unlikely to be avid readers of farm papers and their number or interest not such as to merit two pages of copy.

This turn of events has come about as the result of several years of red ink generating milk prices and plans for delinked market support under the Mid Term Review fo the EU Common Agricultural Policy's Agenda 2000 strategy.

The strength of the British pound relative to the European euro in recent years has resulted in milk prices falling in the UK much more rapidly and further than planned for under Agenda 2000. Further reduction in market supporting intervention prices for dairy products are in the works. Thus, short of an exodus from milk production as perhaps anticipated by the Dairy Update, the outlook is anything but encouraging.

But key to the expectation of a mass exodus is the replacement of existing output related farm payments with market delinked single farm payments. Simply put farmers will receive most of the payments they have received in recent year without in the case of dairy farmers having to touch or smell a cow.

As labour is almost certainly a larger component of milk production costs than for other farm commodities, so the incentive to quit is greater. Of course, nobody knows quite what the true labour costs of producing milk really is as so much is the farmers own time, which he does not have enough of to record such.

But a good few farmers will no doubt be weighing their current net income and the 365 days per year of early morning and late afternoon milking chores against the single farm payment. And asking themselves whether something a little less demanding might not be as rewarding in all senses of the word.

A Milk Development Council farmer intentions' survey this month suggests that 31 percent of farmers plan to leave the industry over the next two years, while only 16 percent plan to expand. And as a consequence milk production could fall by 15 percent. While what actually happens will surely be influenced by milk prices, quota vales and such, it is a very bleak picture.

The single farm payments have, of course, received very positive reviews from academics, those outside the industry and even some within. But geopolitics are already causing a challenge with Scotland and Wales choosing a simple historical basis for payments, while England is going for a rather complex system which has had to be revised even before it has been submitted to EU Commission for the nod.

Meanwhile up and down the country real world decisions are being made, under tight security, on back of the envelopes on kitchen tables. And in the jargon of the academics some "dislocation" appears likely.

What may appear from outside the European Union to be an enlightened move to delink farm support, may yet prove to be foolhardy. (580 words)

May 24, 2004