The Covid-19 outbreak has seen the almost complete loss of the food service and hospitality markets, as well as increasing price volatility in global markets, which has left farm businesses and processors under increased pressure.
This has led to some dairy farmers with no other option but to dispose of milk on farm.
NFU President Minette Batters has called on Defra Secretary of State, George Eustice, to a crisis meeting and to take immediate steps to ensure the sustainability of the dairy sector.
Batters said, “For weeks now, we have been flagging to government in our daily calls the issues within the dairy sector and working with Defra to try and find solutions. But the situation is becoming untenable. Only four weeks ago all of this milk was being used, losing businesses at this stage will leave consumers reliant on convenience stores and other difficult to reach outlets not being able to have access to the same supply of milk.
“We believe there may be at least 2,000 dairy farmers suffering severe financial pressure and that number is growing by the day as a result of the impacts of the coronavirus outbreak and as things develop very few dairy businesses will be left unaffected. We need to move fast to mitigate the impacts of this unfolding crisis on dairy farming businesses across the country.”
She added, “The Secretary of State needs to step in now and take urgent and decisive action, before it is too late and many of those iconic dairy businesses go to the wall.”
NFU dairy board chairman Michael Oakes said a key issue is that dairy farmers or processors largely cannot access the Treasury schemes designed to help businesses through this crisis.
“We cannot furlough staff or stop milking cows, and things like business rate holidays don’t apply to us. We need Defra and the Treasury to work together to extend these schemes so that they can be utilised by everyone in the dairy sector,” Oakes said.
“It’s important for everyone that we protect the UK dairy sector so when the eating out of home experience is allowed to operate normally again, we have the dairy farmers in business and with the capacity to produce milk that forms the basis for dozens of healthy and nutritious dairy products which are loved by the nation.”
The NFU said the Retail and Hospitality Grant Scheme, which provides businesses in the retail, hospitality and leisure sectors with a cash grant of up to £25,000 provides a lifeline for businesses, and the government should provide access to this scheme, or a similar scheme, for those in the agricultural sector affected by coronavirus market disruption.
It is also looking for the Government to engage with the EU Commission about schemes such as PSA, production reduction and market promotion to help restore confidence in the market and prevent adverse publicity related to disposal of milk.
It adds that the Government should explore all crown buying service contracts to make sure the NHS, military and prisons are all sourcing fresh milk. Government should also explore measures to inject cash into the sector via the 2020 BPS.
It also wants Defra to urgently convene with key stakeholders and help manage flows of milk through the supply chain.
It is essential that Government convenes this meeting to maximize industry solutions and confirm that the temporary change to competition law will allow this to happen, without discussing prices, the NFU said.
Defra response
A defra spokesperson said, “We have taken a number of measures to support our food and farming sectors to manage the impact of coronavirus on the dairy supply chain. We are also working very closely with farmer and processor representatives to understand the specific challenges that the dairy sector is facing.
“Frequent discussions with the dairy supply chain will continue through this crucial period to understand what further support the sector needs.
“We have been working closely with the NFU and other stakeholders, and the Secretary of State will also be speaking directly to the NFU President to discuss this matter further.”
Defra also said the Government is working closely with representatives from the dairy supply chain to understand what short-term and long-term support the whole sector needs.
Defra added, "We are in discussions with organisations across the sector to understand the technical issues involved, and to consider with them possible remedies to this situation."
It said it has responded to the critical request for competition law easement through the laying of an SI and the clarification of its application to the challenges emerging in the dairy sector. Defra is now seeking to ensure that this opportunity is being fully utilized by processors to ensure continuation of supply, and looking to facilitate information sharing where necessary.
It also stated defra is currently investigating the options for wider intervention in the sector whilst assessing the necessity of any such intervention in light of the competition law easement.
The Government announced on March 17 that it would be increasing funding for local authorities to support small businesses that already pay little or no Business Rates because of Small Business Rate Relief (SBBR) from £3,000 to £10,000.
The Government also said the Business Interruption Loan Scheme, which provides loans of up to £1.2m for small and medium sized businesses with no interest due for the first six months will be extended to up to £5m.
The Government will be providing £330bn of guarantees so any business needing cash can access a low-cost government backed loan. If demand is greater than initial £330bn, more capacity will be provided. This includes extension to the Business Interruption Loan Scheme, as well as new lending facility for larger firms.
The new Coronavirus Large Business Interruption Loan Scheme (CLBILS) will ensure that more firms are able to benefit from government-backed support during this difficult time.
It will provide a government guarantee of 80% to enable banks to make loans of up to £25m to firms with an annual turnover of between £45m and £500m.