Milk supplies could run dry as increasing rates for dairy production have meant farmers could no longer cover their expenses, Arla Foods has warned.
As a result, dairy farmers are producing less milk with production down by 2% in February and 4% in March.
“Because of the recent crisis, feed, fuel and fertiliser have rocketed and therefore cash flow on the farm is negative,” the managing director of the dairy giant Ash Amirahmadi explained.
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With the cost of producing milk soaring by 36%, he warned farmers were facing difficult decisions and lacking the confidence to continue producing.
“The most important thing now is that we put our arm around the farmers…and pay our farmers more to cover their costs to make sure the milk is flowing,” Amirahmadi added.
Rising production costs have included fertiliser bills which have risen from £350 to £900 a tonne, but also doubled fuel costs.
Arla’s boss Peder Tuborgh also noted that the price of milk in supermarkets is 7% lower now than it was 10 years ago – despite climbing costs for farmers.
Additionally, retailer contracts haven’t aligned with rising production costs, resulting in farmers abroad earning 15% more than UK dairy farmers.
Arla has been the first producer to take advantage of the demand for dairy by trialling exports that are processed at European sites and sold internationally.
“Over the next five years we will have to make some tough decisions about where our milk goes to ensure farmers can cover their costs and continue to invest in reducing their on-farm emissions,” Amirahmadi added.
“The profitability of some of our milk contracts will need to increase significantly when up for renewal in order to compete with more attractive business opportunities that are opening up.”
