Farm Diary January 7 2009

One does not expect a simple bearing to fail, which of course then goes on to damage other things, such as snapping a huge drive-chain. Luckily, the back-up is good (which is the reason for buying this machine), and although it broke at 4.30am we were going again by 11.00am although the cows were not amused!

The very next day a very big red fox came into the garden after the peacocks, and as I scrambled to get a gun (all locked up in the stupid gun safe), he had caught the white one and I had to run out with a gun but no ammunition (locked in the ammunition safe within the stupid safe) and holding the barrel took a swipe at his head with the stock! I missed of course, but he did at least let go and run off. I am after him every day, armed to the teeth, and he is a dead fox I assure you; it's only a matter of time.

The third bit of trouble happened last Sunday morning, when I glanced at my new weather station only to see it was minus 7 degrees Celsius. Fearing the worst, I hastened to the parlour and sure enough it was frozen solid as it was colder there (minus nine) due to it being more exposed. Now due to all the pundits telling me that we were experiencing climate change, I had relaxed a bit, especially as lettuce are now making way for vines both sides of our farm at Tillington! Well here we had a good old freeze-up, just like the ones we used to get in the 1980s.

It took four hours to sort this complex parlour out, and I have discovered just how many little nooks and crannies there are for water to lurk, ready to expand and block all progress. Work to be done there! Salt in the final rinse and more thorough draining of the plant has cured the problem. Global warming? I wish!

The last bit of bad news came over New Year when several people rang me up to tell me how milk prices will take a hit in the coming weeks. Arla are cutting by 2ppl, First milk by 1.25ppl, Wiseman (amount undecided '“ 1.5ppl?) and Dairy Crest and others sure to follow. Why are they cutting the price? Because they can!

Substantial savings are now being made at every factory due to gas and oil prices tumbling, and retailers want reductions in line with this, as increases were given on the back of rapidly increasing oil and energy prices last year.

The processors however want to 're-organise' their own margin (read increase), and have decided that they cannot wait any longer; indeed un-scheduled meetings were called between Christmas and New Year so that farmer representatives could be 'told' of the cuts imposed! The fear is that more will follow. Arla for example has 'guaranteed' the price until April 1st (read 'we will cut again on April 1st).

Costs on farm remain extremely high, as feed and fertilizer purchases were made back in the autumn, with most farmers locked in until the spring. With the country still very short of milk, but moving towards spring when more is produced, I suspect processors have decided that the tumbling world commodity prices gives them a legitimate excuse to cut prices.

Interestingly, this is liquid milk, which is furthest removed from commodity milk, and every one of these companies stood up at the European Dairy Event in Stonleigh last September, proclaiming that the 'premium for liquid milk was set to return', and that they had not paid the high milk prices in 2007/2008 'as they were not in commodity milk'!

Of course things are very different on the world market, and an article in the 'New York Times' highlighted the milk price collapse in the USA. American dairy farmers increased production massively on the back of high world commodity prices, and now it's turned to bust! The American farm-gate price has dropped by 30%, and could fall further. The world financial crises has affected the USA farmer in three ways, demand has dropped globally, middle men and those who move product have suddenly no access to cash due to banks not lending, and the US dollar has strengthened significantly, which make USA exports less competitive.

However, the US government has come to the rescue with a commitment to buy $91 million of milk powder to put in store, which puts a floor in the price. This is not unilaterally popular, as many critics believe farmers should curtail production, and respond to market signals.

It is recognised however that farms are not able to switch production off in the same way as factories, as cows need to be milked and the only way to respond quickly would be to turn cows into beef-burgers! American dairy exports have increased from $1 billion to $4 billion since 2002, due to many developing countries in Southern Asia changing dietary habits, consuming dairy and red meat.

Exports into other new markets such as Algeria, Bangladesh, Indonesia and the Philippines soared, but Mexico was the big one, with exports growing to $853 million from $258 in 2003.

The USA also benefited from New Zealand and Australian droughts, and the weak American dollar. Australian farmers are now suffering huge cuts to their milk price too, and as usual, they are likely to be left to face market forces with no assistance from government. Australian and New Zealand production has increased this spring (over there!), and this adds to the USA's woes. The melamine scandal (in milk powder) in China has also had an effect. Exporters as usual see a bright long term future, given the 'barely tapped markets in the developing world'. In the meantime, USA farmers are bracing themselves for a hard time with low prices for the immediate future.