Dairy farm crisis: The money we earn from selling our milk doesnt cover our costs

When Adam and Lucy Johnstone took over a dairy farm in the south-west of Scotland two years ago, they were able to make a comfortable profit from the milk produced from their herd of 60 cows.

But over the last three months the price they receive for each litre of milk from dairy giant Arla has tumbled by 25% – below the cost of production.

They are now considering selling their milk direct to local customers in nearby Moffat or leaving farming all together.

It’s an issue which is affecting dairy farmers across Scotland. The National Farmers Union for Scotland (NFUS) said the sector is used to fluctuating prices but the recent downturn is “unprecedented” in both speed and scale.

Arla blames the price slump on an oversupply of milk globally. Meanwhile demand for milk and dairy products like cheese and yoghurts remains flat.

The Johnstones say it costs them 38.5p to produce a litre of milk but they are currently receiving 35.7p a litre from Arla.

It means that if they produced 35,000 litres a month, they would be paid £12,495 – about £1,000 less than it costs them to look after their herd.

Lucy said that although farmers are resilient, the pressures they are facing are unsustainable.

”As an industry we become accustomed to making a loss, and that’s meant to be OK because at other times of the year we make a little bit more money,” she added.

”I find it tough that we’re meant to be OK with not covering what it costs us to produce food that we’re feeding the nation with.”

The couple are now exploring the option of selling milk direct to customers in addition to their current contract with Arla.

They said the support shown by local residents, hoteliers and businesses reminds them that there is an appreciation for the country’s farmers, but that the ongoing stress has left them contemplating leaving the industry.

Adam said: ”It’s soul-destroying to be honest. There are a lot of benefits that come from farming that aren’t financial- we have a great way of life and get to spend a lot of time with the kids.

”But the financial pressures are there day-in, day-out and don’t go away when you go to sleep. We’ve had multiple conversations about getting out of farming.”

For the first time, UK milk production is expected to exceed 13 billion litres this year.

Meanwhile prices for mild cheddar, butter and skimmed milk powder are all approaching their lowest levels for five years, according to NFUS.

Large dairy processors like Arla, Muller and First Milk have been cutting the price paid to farmers for their milk for a number of months, in what they say is in response to the global markets.

They are facing pressures of collecting, processing and selling an excess of milk which is outstripping consumer demand.

A spokesperson for Arla said: ”Global milk production has increased so there is significantly more milk around the world. This is therefore impacting negatively on the global commodity markets, resulting in lower prices.

“As a cooperative owned by the same farmers who supply our milk, Arla’s profits go directly back to our farmers as payment for their milk and to support the future of dairy production.”

A spokesperson for Muller UK and Ireland said they recognised the pressures facing farmers and “maintain close dialogue” with them and their representatives.

“We will always offer a competitive milk price and are working collaboratively with farmers, their elected representatives and retailers to help create conditions for greater price stability, support new growth opportunities and protect both security of supply and the long‑term sustainability of the British dairy sector,” they added.

First Milk communications director Mike Hindle said the challenges of the dairy industry were complex.

”We make a lot of cheese and some of that is exported,” he added.

“There has been a change in trade flows within the global cheese market with more cheese coming from the US and New Zealand into the UK and Europe.

”They are producing at lower prices for various reasons and so there is a loss of value within those markets as well.”

NFUS is now calling for trust, transparency, and fairness throughout the supply chain.

Committee chairman Bruce Mackie said: ”Processors must communicate clearly and fairly with suppliers. Farmers deserve transparency and trust during such a critical time.”

The dairy industry has attracted some significant investment recently, like Arla’s £144m upgrade to their processing plant in Lockerbie.

Vice-president of NFUS, Robert Neill, said that shows a long-term commitment to the industry, but that more help is needed urgently to stabilise the situation.

“This is about more than milk – it’s about rural jobs, local food security, and the future of our communities,” he added.

“The supply chain must share the risk, not just the reward.”

Meanwhile, the Johnstones say they are in “survival mode”.

Adam is a former marine and is an amputee. He wears a prosthetic leg and with regular flare-ups, his doctors advise resting when he is in pain.

However, Lucy said the financial pressure means that Adam is working through the pain, and it is now affecting family life.

“We have two young children that he wants to run around with and at the minute he’s giving his all to that farm,” she said.

“It’s not to give us a good salary, it’s to keep us afloat, it’s survival mode and it’s not fair on him.”