There is always a moral maze in trying to run an ethical business.
We know that we are already operating the farm to a very high level of welfare. Add to that the fact that 2014 has been one of our most profitable years over the past 30 years, which has helped us reduce some of the loans we got from friends and family to build the new dairy. So we must be doing something right – why change it?
For the moment it seems that the organic dairy price, unlike the conventional dairy price, will maintain at a reasonable level, which should make 2015 a good year too. Moral Dilemma: should we (pardon the pun) ‘milk’ these years as much as we can to pay back most of our loans over the next couple of years, or should we put our money where our mouth has been for the past 8 years and start another trial of allowing the dairy calves to suckle their mothers this autumn? Discuss!
There’s lots to consider. Will the organic milk price hold? The conventional milk price that farmers get paid has fallen through the floor. The price of organic milk is often 6 months behind the conventional milk price. Indeed in 2013 there was a period where the price for conventional milk was higher than organic, because organic still had to catch up!
Why has the collapse of the worldwide price of conventional milk happened? It’s that old supply and demand see-saw. The price of conventional milk was good, with one of the main reasons being the increase in demand from China. So dairy farmers worldwide increased their herds to meet demand and to make the most of the high price. Why wouldn’t you? Indeed, at a UK level national strategies were put in place by both Ireland and Scotland to encourage dairy farmers to increase supply. But then international relations with Russia resulted in embargos and China’s economic growth has started to become a little jittery. On top of which, China has been expanding its own dairy herds. End result - a lot of surplus milk sloshing around the world.
In the UK, most farmers have a contract with a wholesaler or retailer or manufacturer – e.g. Wisemans or Tesco or a cheese manufacturer. But if a farmer was feeling bullish, they might have chosen to ‘fly solo’ and take the spot market price. In times when there is not enough milk being supplied the spot price is much higher than they will get with a contract, but if there is an oversupply then the spot price is very low, or indeed non-existent. Right now most farmers with no contract have nowhere to sell their milk. Scary indeed!
So if the organic milk price often lags behind the conventional price by a few months, why do we think that the price will hold for organic milk? Back to the supply and demand see saw – the organic market in the UK is more or less in balance. Looking back over the last few years, the conventional price was so good, why would anyone have started the conversion to organic? On top of that there is beginning to be a slight uplift in organic milk sales, so everything is in balance. For those farmers now considering converting to organic production, there is at least a 2 year conversion period, so we can be reasonably confident that our price will hold (famous last words?)
But my basic lesson in O level economics demonstrates just how vulnerable farmers are. We talk about being ‘price takers’ rather than ‘price makers’. When dealing in a commodity then you have virtually no control over the price that you receive.
This is one of the many reasons that we are on our journey to be a more sustainable business and to differentiate the products that we make with our milk. Can we take control over both our income and our costs. By building our market for cheese we will be using a lot more of the farm’s milk ourselves, we can stop being ‘price takers’. And also by greatly reducing our dependency on bought in feed and energy we will not be at the vagaries of world markets.
So when we make a list of the pros and cons as to whether we start another trial of the calves suckling their mothers, our heart says ‘yes’ and our head says ‘no’. The balance is swinging in favour of us using the good years to get us on to a better financial footing for the next trial.
That decision was as good as confirmed when we were given the fantastic opportunity of working with a professional research company who specialise in sustainable farming. Together we plan to re-apply for European research funding which would enable us to have an independent assessment of the new calf suckling system so that it wasn’t just our rose tinted spectacled view of the viability and sustainability of the system. With a bigger organisation behind the research, there is much more of a realistic possibility that other farmers could be encouraged to replicate our system.
The good news is that we are now 99% sure that we will be going ahead with the trial – but in the Autumn of 2016. We know it sounds like ‘never-never land’. But the reality is that farming can’t just turn the tap on and off, we have to plan for years – sometimes even decades – to make environmental and welfare changes. The important thing is that we are still on that road. Please stay with us!