Livestock farming, where did the money go?

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A young farmer was talking to me. An old chap had told him that when they wanted to buy a new tractor they sold three new calved dairy heifers. The young farmer wanted to know if this was true.

The answer is, yes, it’s true. Admittedly his informant bred damned good cows, and the rest of us might have had to sell four heifers, but still. The problem for the young chap was that to buy an equivalent tractor he’d have to sell between fifteen and twenty dairy heifers. The reason is that tractor prices are linked to the general economy, dairy heifer prices are linked to the price of milk.

 

In agriculture we’re regularly told that we cannot rely on handouts from the state, we have to become more efficient. So I decided to explore the roots of our industry’s inefficiency.

Looking at milk first, because that’s what I know, we started milking in 1965 and we still have our first milk cheque. We sold 1822 gallons to the Milk Marketing Board, for the princely sum of 28.77d per gallon. That is in modern terms about 12p per gallon or in even more modern terms, 2.64p per litre.

Now then, my late mother-in-law was a remarkably organised lady who jotted down in a notebook exactly what she paid the milkman. In June 1965 she was paying him ten pence halfpenny per pint. This is 84d per gallon, or 35p per gallon. That, to keep a la mode is 7.7ppl.

So in simple terms the customer paid their supplier three times what the supplier paid the farmer. But then they got the milk delivered to their door every day by an environmentally sustainable electric vehicle in a reusable container. The empty container was taken away for them at the same time.

 

Now let time roll onwards a bit and we come to financial year 1995/6. Checking through each of the twelve milk cheques we got for that period, we were paid an average price of 24.335ppl.

In 1995 government statistics say that the retail price for milk was 36per pint or 63.35ppl

Today our current price is 24ppl.

If I go to Tesco and buy four pints of milk, it costs me 109p or 48ppl (or so it boldly proclaims on the shelf.)
So now the consumer only pays twice what the farmer gets, but of course they have to carry it back from the shop themselves and the container cannot be immediately reused (and you have to carry it to the recycling centre.)

 

But what about inflation. What is the spending value of a pound? Well a pound in 1965 bought as much as £10 in 1995 and £16.56 today.

So we can create this table.

 

 

 

 

  Milk Producer Consumer
Year Actual

Price

What Price should be allowing for inflation Actual

Price

What Price should be allowing for inflation
1965 2.64ppl 2.64ppl 7.7ppl 7.7ppl
1995 24.33ppl 26.4ppl 63.3ppl 77.7ppl
2020 24ppl 39.74ppl 48ppl 127.5ppl
         

 

So rather than earning 24ppl the dairy farmer ought to be on 40ppl to keep up with inflation.

1995 is actually an interesting and significant year, it was the year of the 1995 Agriculture act. Pushed through by the Conservative party, one thing it encompassed was the death of the Milk Marketing Board. To simplify history and paint with a broad brush, British dairy farmers, faced with being picked off by the dairy industry, formed another co-op, Milk Marque. Membership was very high, probably well over 90% of dairy farmers joined. This obviously didn’t suit our political masters because the Competition Commission was called in and it insisted that Milk Marque should be broken up. There was argument at the time that the Commission had overstepped its remit as in this case competition was an EU issue not a UK issue and Milk Marque was not a threat to competition on an EU basis. As the BBC commented, “[The Labour] government announced a shake-up of the milk supply industry in July to prevent Milk Marque, the major supplier, from exploiting its monopoly by manipulating prices.”

If by manipulating prices it meant ensuring farmers in point of fact got a fair price, then it was probably guilty as charged. But with the break-up of the co-op, our two main political parties basically threw dairy farmers to the wolves. So if anybody asks why UK dairy farmers don’t form co-ops, the answer is, we do but governments destroy them.

 

Lamb

Now back in 1965 we had some sheep. We made a living of 17 cows and 60 ewes. My father sold lamb, dead weight, for 3 shillings a pound, 15p per lb which is 33p per kilo. For comparison, I was sent the Hill Farming Research Organisation Farm Reports and Flock Record for the year ending October 1965. So it looks as if my Dad’s price was about reasonable.

 

Year Lambs sold Carcass wt. in kg Price in pence per kilo
1959 139 13.15 34.40
1960 85 12.47 31.47
1961 135 12.70 35.43
1962 94 12.25 33.15
1963 127 12.47 34.39
1964 111 12.47 33.35
1965 188 11.11 30.14
Average pence per kilo 33.19

 

 

The current farm gate price for lamb (from the AHDB website) is 470p per kilo.

Looking for consumer comparisons is trickier than for milk. So I picked for a comparison Lamb Shoulder, with the bone in. They didn’t start keeping prices for it until 1968 by which time we’d stopped keeping sheep but I feel the comparison is fair enough.

 

  Sheep Producer Consumer buying lamb shoulder
Year Actual

price

What Price should be allowing for inflation Actual

price

What Price should be allowing for inflation
1965 (1968) 33p 33p 46.6p 46.6p
2020 470p 546p 789p 761p

 

Sheep producers are doing not too badly. They’re getting 86% of what they got back in 1965 compared to dairy farmers are only getting 60%. The consumer price for lamb has also remained about the same, consumers are paying 103%. The difference is largely in the pockets of the retailers.

Beef

Then we have beef. My Father didn’t sell many bullocks, and he actually received the same price per pound as he did for his lambs. So I got a current price for beef of about the same quality off the AHDB website, and for the consumer, I picked Beef Rump steak because it was one of the few things with a price recorded through the period.

 

Beef Producer Consumer buying beef rump steak
Year Actual Price What Price should be allowing for inflation Actual

Price

 

What Price should be allowing for inflation
1965 (1968) 33p 33p 108p 108p
2020 370p 546p 1393p 1788p

 

So allowing for inflation, farmers are getting 67% of what they were in 1965. Consumers are paying 78%.

Why have beef and sheep suffered less than dairy? Bad to say, I’m just guessing. If I’d got figures for pigs and poultry they would have shown farmers having an even harder time. Their problem is they’re ‘efficient’ and the major retailers have pretty well got them under control. Dairy was screwed by a political decision. Beef and sheep are far less ‘organised’ and ‘efficient’. I remember one major supermarket buyer commenting at a meeting that they expected to do to beef and sheep what they’d done to pigs and poultry. In his words, “The learning curve was so steep we effectively ran into a brick wall.”

Sheep marketing is so ‘old-fashioned’ and ‘inefficient’ that the retailers haven’t been able to take control. As a result the sheep farmer keeps more of the end price. This is probably why the multiple retailers don’t push lamb.

 

With beef the retailers are currently trying to take over beef by the back door. To quote industry expert Ian Potter,

 

“Earlier this year, I described Sainsbury’s reputation with its aligned producers as continuing to slide downhill, particularly for those who have faced the impact of the Tomlinson’s collapse. Well Sainsbury’s (SDDG) aligned farmers are once again furious at how the retail giant “is walking all over us to the point we feel like contract milkers and may as well hand over control of our farm to Sainsbury’s”. 

The latest spat is down to the bully boy wanting to sell more of its own beef in store, insisting a minimum of 20% of the beef calves from each producer are sired by one of two Angus Bulls, with the semen only available from Genus at circa £11 per straw. The calves will be sold to Blade Farming at from 10 days old to a maximum 41 days for £156 for heifers and£242 for bulls less haulage. It’s a non-negotiable compulsory change starting in 2021 in England and 2022 in Scotland, and it has got the farmers steaming. Several are claiming its Sainsbury’s acting in an anti-competitive manner. 

I really struggle to understand how my close neighbour and current Head of Sainsbury’s Agriculture, Barney Kay, has seen fit to force this through! Surely, it could have been achieved by negotiation, especially if it’s such a great proposition. Furthermore, if Sainsbury’s is dictating the bull semen to be used it should pay for it! The move has gone down like a lead balloon, especially with many Sainsbury’s farmers who have long standing trusting relationships with others who take their calves, or who rear and finish their own beef in addition to those who breed only pedigrees. It has even resulted in one Sainsbury’s farmer representative resigning.”

 

Beef is still suffering from the impact of BSE. After all beef exports only resumed in 2006.

Looking at the table below, as usual prices are in pence per kilo. I’ve used the same rates of inflation as I have elsewhere.

Just to put things in perspective with the BSE effect; as you can see, for retailers, their selling price fell to 90% of the previous price before bouncing back. For farm gate figures I’ve used our numbers, we sold black and white bullocks so never topping the market. Also we sold live weight so I’ve done an approximate conversion to get dead weight figures. Do not quote these this conversion to reputable people, they’ll fall about laughing.

For beef producers their price fell to about 70% and looking at our figures for the rest of the decade we rubbed along at this sort of level and things never really recovered by 2001 and FMD hit.

 

 

Farmer % of 95 price Beef Producer Consumer buying beef rump steak Retailer % of 95 price
Year Actual

Live weight

Estimated dead weight 1965 Price allowing for inflation Actual

 

1965 Price allowing for inflation
100% Sept 95 115p 209p  

 

330p

857p  

 

1080p

100%
69% July 96 80p 145p 773p 90%
78% July 97 90p 164p 858p 100%
69% July 98 80p 145p 841p 98%

 

 

But there are consequences.

In financial year 1965/6 my father, in his first year as a tenant farmer, showed a profit of £1562 17s 8d. Allowing for inflation that is the equivalent of £24,304. This was off 17 milk cows and 60 sheep on 72 acres.

We can look at how much money has been sucked out of the industry. Assume a hundred acre farm milking a 100 dairy cows each giving 7000 litres a year, a total of 700,000 litres.
There is a 15.74ppl deficit on every litre compared to the 1960s. That is over £110,000 sucked out of the business. In comparison, the Basic Payment Scheme payment to a farm of that size will be £9422. Now you can see why my Grandfather could afford employ three full time men and a lad. That meant that hedges could get trimmed by hand and laid every few years. It meant that walls could be kept up.

There are further implications. The modern dairy farm is seriously efficient to survive. So the cows have to be happy and comfortable. The problem comes when it rains. The cow is neither happy nor comfortable and her milk yield drops like a stone. Because of the tight margins dairy farmers now habitually work to, a lot of them are being forced to look at whether they can afford to let cows graze outside, rather than have them inside all the year round. Talking to one he calculated that if somebody wanted him to revert to a traditional grazing pattern, they’d have to find him a 1.5 pence per litre grazing supplement to cover his extra costs.

Then there is the machinery issue. I started off by pointing out how expensive machinery is in real terms. So more and more farms fall back on contractors. The contractor makes his money by doing as many acres as possible during a day. After all when making silage for his clients, he could have half a dozen farmers waiting for him and only a limited window of dry weather. He needs a big forage harvester, large trailers and serious tractors capable of both pulling and braking the trailers. It’s the same with slurry. Not only to you have the pressure of weather and season, you have EU regulations saying when you can and cannot spread in some areas. So the contractor that turns up on the farm might be expecting to empty your slurry pit in the morning, do another farm in the afternoon/evening. So he needs a bigger tanker which therefore has wider wheels so it does less damage and an even bigger tractor to pull it. So if you dislike the huge tractors roaring around the lanes, now you know why they’re there. To make a living, a contractor has to have the biggest kit they can afford to pay the finance on.

 

Also remember that this all happened when we were members of the EEC/EU. You know, the bunch that ‘featherbeds’ farmers.

Indeed Article 39 of the Treaty of Rome reads,

“ARTICLE 39 1. The objectives of the common agricultural policy shall be:

(a) to increase agricultural productivity by promoting technical progress and by ensuring the rational development of agricultural production and the optimum utilisation of the factors of production, in particular labour;

(b) thus to ensure a fair standard of living for the agricultural community, in particular by increasing the individual earnings of persons engaged in agriculture;”

 

There are other objectives but we’ll stop there. It’s obvious this one was something they haven’t taken seriously for a while.

♥♥♥♥

There again, what do I know? Ask an expert.

 

A collection of anecdotes, it’s the distillation of a lifetime’s experience of peasant agriculture in the North of England. I’d like to say ‘All human life is here,’ but frankly there’s more about Border Collies, Cattle and Sheep.

As a reviewer commented, “This is a delightful collection of gentle rants and witty reminiscences about life in a quiet corner of South Cumbria. Lots of sheep, cattle and collie dogs, but also wisdom, poetic insight, and humour. It was James Herriot who told us that ‘It Shouldn’t Happen to a Vet’ but Jim Webster beautifully demonstrates that it usually happened to the farmer too, but far less money changed hands.

I, for one, am hoping that this short collection of blogs finds a wide and generous audience – not least because I’m sure there’s more where this came from. And at 99p you can’t go wrong!”

18 thoughts on “Livestock farming, where did the money go?

  1. Doug August 7, 2020 at 5:37 am Reply

    You do seem to be blaming the EU for political decisions by UK government’s and unscrupulous behaviour by supermar,at chains?

    • jwebster2 August 7, 2020 at 6:07 am Reply

      Not blaming them for the decisions, but pointing out that in an area where the EU did have authority, it did nothing. Indeed it could have stepped in and stressed that under European law, Milk Marque didn’t need to be broken up
      But the EU isn’t really the villain here

  2. jenanita01 August 7, 2020 at 8:07 am Reply

    The whole system smells bad. Not sure how any farmer gets up at dawn every day with any joy for the day in front of him…

    • jwebster2 August 7, 2020 at 8:34 am Reply

      An interesting question. I suspect a lot love the job and the way of life.
      You know the comment, I’d still do the job even if they didn’t pay me.
      In agriculture successive generations of politicians seem to be driving this to breaking point 😦
      I had one year where I worked out that at the end of it, I’d been working for 9p an hour. But then at least it wasn’t a year in which I lost money and effectively borrowed from the bank for the privilege of working. I had years like that as well.

  3. Jane Sturgeon August 7, 2020 at 10:25 am Reply

    I don’t read it as blaming, Jim, just stating facts as you see them. It will be interesting to see how Sainsbury’s brickbat is handled. I don’t know how you keep up with it all and manage to be a farmer. Throwing dairy farmers to the wolves was a bad move and yes, the EU could have stepped in and thrown their supportive weight behind the farmers. Makes you wonder what the government’s goal is? Also, how long the supermarket giants can jerk the supply chain like this. Something has to break and I pray it’s not the farmers. 🙂

    • jwebster2 August 7, 2020 at 2:39 pm Reply

      Government’s goal is simple. Cheap food.
      The proportion of a family income that is spent on food has fallen. This leaves money to spend on phone contracts, netflix subscriptions, etc etc
      At one point the average family spent more a week of their Sky subscription than they did on meat! I don’t know if it’s true any more

      • Jane Sturgeon August 7, 2020 at 3:02 pm

        After lockdown, who knows Jim. A lot has got twisted!

      • jwebster2 August 7, 2020 at 4:00 pm

        I can see things getting very twisted. Somebody asked me for advice and I told them to ‘work for the government’ (rather than in one of the companies hired by the government)

      • Jane Sturgeon August 10, 2020 at 8:56 am

        Yes Jim, it is going to get messy.

      • jwebster2 August 10, 2020 at 9:31 am

        sadly 😦

  4. Stevie Turner August 7, 2020 at 12:44 pm Reply

    I watched a TV programme recently where milking was automated. The cow turns up for milking when she feels like it, and the pumps are attached to teats via laser recognition. Have you heard of this? Apparently it produces a very happy cow and gallons more milk.

    • jwebster2 August 7, 2020 at 2:41 pm Reply

      Yes there are quite a few systems in operation. They’re something every dairy farmer will contemplate when upgrading. For example they don’t work with a herd that is grazing but need to cross a road to get fields. So they probably work better where a herd is housed all the year round
      Then there’s the cost. They do get rid of a member of staff, but in reality you still have to have somebody on call 24/7 to make sure everything is going OK. Also the man you got rid of also did other jobs, he was the spare tractor driver when you needed on. So it’s a balancing act as always

  5. Eddy Winko August 7, 2020 at 4:42 pm Reply

    It sounds like the good old days were in fact the good old days. 🙂

    • jwebster2 August 7, 2020 at 4:48 pm Reply

      very much so. It would be nice to make a decent living of seventeen cows and 60 ewes

  6. Doug Jacquier August 7, 2020 at 8:58 pm Reply

    More figures than a beauty contest, Jim 😉 However in your eminently sensible piece (which should be a compulsory read for every MP, with a test afterwards for comprehension), there were two bits that struck chords with me.

    ‘But then they got the milk delivered to their door every day by an environmentally sustainable electric vehicle in a reusable container. The empty container was taken away for them at the same time.’ In a world seemingly obsessed with sustainability, how did we allow that to happen?

    ‘Now you can see why my Grandfather could afford employ three full time men and a lad.’
    I don’t recall any country having a serious discussion with its citizens about the costs of things being ‘cheap’. The jobs (especially the entry level ones) that have been lost to lower costs (e.g. supermarket packers and carriers, driveway attendants, public transport conductors, apprentices and the list goes on) have written off the future of an entire generation that will never get work, never own or securely rent a house and will always live in poverty. A campaign based on ‘that cheap loaf of bread/litre of milk/litre of petrol just cost your son/daughter a job’ may just dramatise the issue.

    • jwebster2 August 8, 2020 at 4:29 am Reply

      Basically I don’t think people actually are all that bothered about the whole ‘environmental thing’ otherwise why would there be so much importance given to getting Airlines and airports up and running. Accept the new and environmentally acceptable normal that not many people fly and they don’t do it often.
      Sacrifices for the environment are made by ‘other people.’
      It’s the same with stuff being cheap. People would rather ‘warehouse’ their fellow citizens on low level benefits than spend more more necessary to give them a decent wage 😦

  7. […] from either scheme. Now we cannot just expect the market to fill the gap. I mentioned about the way farm gate prices have fallen here and in the world of Covid, with a lot of consumers having a lot less money to go round, I foresee […]

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