Organic dairy farming in 2022: Opportunities and challenges

The worth of the UK natural dairy sector has remained pretty flat over the past 5 years, with shopper demand in the UK behind many different developed nations.

Despite this lack of development, David Williams, chief govt at natural milk co-op Omsco believes there’s a good future in natural dairy, and longer-term potential for an incredible future.

We check out the scale of the present market, how that is prone to develop, and what it might value to transform to natural.

See additionally: Business Clinic: what are the tax points on promoting inventory

Organic milk stays a small share of the broader market, accounting for between 3% and 5% of all milk deliveries.

Organic numbers

  • In 2021, there have been 59,300 natural dairy cows in the UK, with 47,200 head in England, based on Defra.
  • Overall, UK natural cattle numbers had been estimated at 295,600 head.
  • A complete of 506,600ha of land in the UK was farmed organically in 2021. Of this, 61% was everlasting grassland and 9% used to develop cereals.
  • The complete UK natural market was valued at £1.4bn for the 52 weeks ending 26 December 2021, up 1.4% on the earlier yr, based on retail analyst Kantar.
  • While simply 1.2% of the nationwide food plan is natural produce, knowledge from Kantar  exhibits natural dairy accounted for 30.8% of the entire spend on natural meals.

Current market

The milk advertising and marketing yr from April 2021 to March 2022 noticed a complete of 487m litres of natural milk delivered to processors, down by 5.9m litres on the 2020/21 milk yr, based on provisional estimates from the AHDB.

This was equal to a 1.2% lower in natural milk deliveries, in contrast with a fall in standard milk provide of 0.7% throughout the identical interval.

More lately, the every day common for natural deliveries was 1.45m litres for the week ending 7 May, with deliveries 6.9% beneath the identical week final yr, equal to 108,000 litres a day.

Per capita spending on natural merchandise is far decrease in the UK than in many different developed nations.

This might provide an actual alternative for development, based on Mr Williams, who believes there’s a good future in natural dairy, and longer-term potential for an incredible future.

“The natural sector in the UK is at present considerably underperforming in phrases of market share for each cheese and liquid milk in contrast with Germany, France and Denmark,” he mentioned.

The UK is a internet exporter of natural merchandise and has a heavy reliance on European and US markets, which account for about 80% of the worldwide natural market.

The EU goals to have 25% of agricultural land farmed organically by 2030.

If it’s profitable in assembly this goal, this might have a major impact in the marketplace for UK natural exports.

Industry gamers

Omsco accounts for greater than half of the UK’s natural milk provide, processing greater than 250m litres a yr from about 250 suppliers.

The enterprise has a turnover of about £100m and provides a lot of the UK’s natural market, in addition to exporting a variety of merchandise corresponding to cheese, bulk components and whey to key markets together with the US.

Arla is one other main participant in the natural sector and is at present focusing on 50% development of its natural dairy enterprise by 2026, which might take it from 180m to 270m litres by way of elevated manufacturing from its present producers.

Arla Foods managing director Ash Amirahmadi believes shopper demand for natural dairy merchandise will proceed to develop in the UK, in addition to in different elements of Europe.

Price problem

However, the natural milk value has been struggling to maintain up with the speed of value development seen in standard milk costs in current months.

Dairy market analyst Chris Walkland says: “The natural sector value has gone up at half the speed of the traditional milk value.”

Historic farmgate value premiums for natural milk have historically been about 25% to 30%, whereas at present they’re nearer to a 12% to fifteen% premium over standard costs.

The narrowing of this hole is illustrated by Arla’s May 2022 value for a traditional normal manufacturing litre at 43.30p, whereas its natural members are receiving 49.58p/litre.

This compares with 32.79p/litre (standard) and 41.15p/litre for natural milk in May 2021.

Feed prices

With a robust give attention to forage, natural methods require elevated entry to grazing, and cattle might be outside for between 120 and 200 days a yr.

However, spending on different feed prices is commonly a lot decrease than standard methods.

Dairy advisor Ainsley Baker says the common natural dairy value of manufacturing is being elevated by very vital rises in feed prices on account of Russia’s invasion of Ukraine, limiting entry to key components used in natural dairy rations.

Mr Baker, who’s a companion in Kite Consulting says: “There is a large variation between the very best and lowest paying natural milk consumers. At the decrease finish, the common producer might be struggling to maintain their value of manufacturing beneath the milk value they’re receiving.

“Feed use for many natural dairy farms is at present low whereas producers profit from grazed grass.

“Alongside different value will increase on farm, the important thing problem might be this winter, when compound feed prices might rise by greater than £150 a tonne in contrast with final yr, considerably rising the common value of manufacturing for natural milk.”

Producing enough high-quality forage from home-grown sources, rather well managed grazing platforms and an uncompromising method to cow well being and fertility might be extra vital than ever this yr for natural dairy producers, based on Mr Baker.

In February 2022, the common margin over bought feed for all farm varieties was 25.51p/litre, in contrast with 21.33p/litre in February 2021, based on Promar’s Milkminder month-to-month report.

No figures had been out there individually for natural dairy, nonetheless non-organic farms averaged a margin over bought feed of 25.36p/litre, which is barely decrease than the determine for all farms, implying the margin for natural farms was barely larger than this.

The natural sector has seen the identical form of scale of will increase in power, labour and feed prices as standard dairy based on Mr Williams.

However, natural manufacturing is barely decrease yielding.

Accountancy agency Old Mill’s Milk Cost of Production report, overlaying the yr to 31 March 2021, mentioned: “The efficiency of natural herds was variable, with some producers reaching income throughout the prime 10% of standard farms and equally with some producers falling throughout the backside 10% of standard farms.”

Mr Williams suggests {that a} additional subject is that giant variety of shoppers don’t perceive that natural produce is licensed – he says the business must simplify the message to the buyer.

“If you get the messaging proper, the premium appears to be there, and the retailers will inventory it,” he mentioned.

Phil Sutton, chief govt of Yorkshire-based natural feed suppliers ZEA, mentioned a excessive proportion of components in natural feeds are imported.

In current months, in addition to the sharp rise in value of feed commodities, a spike in transport container costs and bulk vessel costs has added disproportionately to natural milk manufacturing prices.

Another subject, based on Mr Sutton, is that the UK natural arable sector is aiming primarily for meals grade produce reasonably than feed grade, which limits the supply of house produced product for natural feed.

Outlook

Organic dairy can look a sexy market to maneuver into as fertiliser costs proceed to rise, placing strain on standard methods.

The sustainability agenda, soil well being and regenerative farming practices are key present business buzz phrases which can be already typically normal practices for natural dairy, says Mr Williams.

As the business shifts additional in this route, it’s seemingly natural methods will play a bigger half, so long as the margins are proper for producers, he says.

Organic British cheddar is taken into account a premium product in the US and put up Covid-19 commerce with the US appears to be choosing up and producing some good curiosity, says Mr Williams.

However, it’s reportedly more durable to export contemporary liquid milk and bulk cream to Europe following Brexit.

Funding to transform to natural dairy

Payments for natural farming in England are rising by between 50% and 500% for these getting into a brand new scheme with Countryside Stewardship, based on the Soil Association.

The software deadline for Mid Tier is 29 July, agreements are on account of begin on 1 January 2023 and will final for 5 years.

Organic farmers are additionally anticipated to qualify for the very best ranges of funds for the Sustainable Farming Incentive (SFI).

Gareth Morgan, Soil Association head of farming coverage, mentioned: “Government help for this fashion of farming is on the rise, with huge hikes in fee charges for changing to natural this yr.

“Better entry to help for tenant farmers is required throughout the SFI – however it’s encouraging that the SFI will reward farmers for sustainably managed grasslands with extra numerous, natural leys and pure types of nitrogen like clover.

“Despite a lot short-term uncertainty, we hope the route of journey that authorities has outlined alongside continued development in the natural market can provide farmers confidence to change to nature-friendly farming like natural.”

England – natural conversion and administration charges/ha

Conversion fee

years 1 and 2

Management fee

years 3 to five

Rotational land £256 £109
Improved everlasting grassland £150 £20
Unimproved everlasting grassland £76 £31

Scotland – natural conversion charges/ha

Years 1 and 2 Years 3 to five
Arable £280 £65
Improved grassland £140 £55
Unimproved grassland/tough grazing £12.50 £8
Fruit and greens £400 £200
Source: Soil Association

Case examine: Tim and Louise Downes, The Farm, Shropshire

tim downes

Tim and Louise Downes © Richard Stanton

Tim and Louise Downes handle a herd of 500 cows on 357ha in Shropshire, supplying Omsco.

The farm is break up between two grass-based natural models, rearing their very own replacements and ending beef from herd.

They are introducing extra natural leys and clover mixes in order to make greatest use of their out there assets.

Mr Downes says they intend to maneuver extra in the direction of the resilient natural leys, together with chicory, plantain and white clover, and have much less reliance on rye grass-dense leys.

The intention is to graze cows successfully in the course of the summer season months with much less drought threat and into the late autumn when the grass isn’t rising so rapidly.

The farm doesn’t at present develop any arable crops for feed, as an alternative specializing in its grassland administration, though rising wholecrop has been experimented with in the previous.

Mr Downes says: “Rising prices of manufacturing are having a huge effect at present in phrases of the price of feed, gasoline and fertiliser.

“We are utilizing foliar feeds and some soil nutrient changes to strive and enhance our carbon footprint and all this stuff value cash and these prices are going up.”

His recommendation for dairy farmers contemplating changing to an natural manufacturing system is:

  • Understand the market absolutely
  • Ensure minerals in the soil are effectively balanced
  • Encourage clover development and acquire information of different therapies
  • Be proactive with advisors and get them on board with the transition
  • Build up help networks across the enterprise from these with information of natural methods
  • Get recommendation from the natural certifying our bodies

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