A. UK dairy industry

The UK is the third largest milk producer in the EU after Germany and France – and the ninth largest producer in the world.

Milk accounted for 16.1% of total agricultural output in the UK in 2010.

1 Around 13 billion litres of milk are produced each year. Most of this is consumed within the UK, as liquid milk and dairy products. The industry was worth £3.3 billion at market prices.2

In 2010, around half (51%) of the milk processed in the UK was used for liquid milk. A further 26% was processed as cheese, with the remainder used for milk powder and condensed milk (10%), cream (2%), butter (2%), yoghurt (2%) and other products (3%).

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B. UK dairy herd

Table 1 shows that the number of dairy cows in the UK has declined steadily since 1980. The total has fallen from 3.2 million in 1980, to 1.8 million in 2010: a 43% reduction.

The decline in the size of the dairy herd has been accompanied by a similar fall in the number of dairy producers.

Table 2 shows that the number of registered dairy producers in the UK fell from 35,741 in 1995 to 15,716 in 2010.

Table 3 shows that the average herd size has risen, as those holdings with smaller herds have left the industry. In 2009 the average number of cows per herd was 113, compared to 80 in 1999.

C. Production

While the number of UK dairy cows has decreased, the yield per cow had been increasing up to 2005.

As a result, total domestic milk production has been fairly static between 1995 and 2005.

Between 2005 and 2009 total domestic milk production has fallen.

However, in 2010 production increased for the first time since 2003, and average yield per cow has increased every year since 2008 (see Table 4).

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Table 5 details milk production over the period 1998-2009 in the fifteen top milk-producing countries in 2009.

The decline in production over the period in the UK corresponds to reduced outputs in a number of other European countries.

By contrast, production in China, Pakistan, India, Brazil and New Zealand has increased considerably over the period.

D. International Trade

There is little overseas trade in liquid milk, but considerable trade in processed products.

In 2009 less than 0.5% of liquid milk produced in the EU was exported.

5 Table 6 shows that the UK had a negative trade balance in dairy products in 2009 – mainly butter and cheese.

Imports make up a very small proportion of total supply of liquid milk in the UK.

Less than 1% of milk available to UK dairies was imported in 2010.

6 For milk products, imports are more important. The UK imports significant quantities of butter and cheese, being 67% and 54% self-sufficient in each respectively in 2009.7 For cheese, imports are largely from other European countries: Ireland, France, Germany, Italy and Belgium were the leading origin countries for these imports in 2010. Imported butter mainly comes from New Zealand, Denmark and Ireland.8

E. Consumption

In 1995, doorstep delivery accounted for 45% of household purchases of milk in Great Britain.

By the end of 2010, this proportion had declined to 5%, with retailers accounting for the remaining 95% of sales.

This switch has been accompanied by a growing price differential between milk from the two sources.

In 1995, a pint of milk cost an average of 37.9p on the doorstep and 23.9p from retailers.

By the end of 2010, a pint cost 57.5p on the doorstep and 36p from retailers.

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F. Farm-gate prices

Farm-gate prices are those received by milk producers.

They are monitored monthly and represent the average price per litre, net of delivery charges.

Chart 1 shows that until 2007, the trend was towards declining prices, from around 25 pence per litre (ppl) in 1997 to 18 ppl in November 2007.

However, a sharp upturn in prices since November 2007 means that the 12-month moving average has now risen to around 25 ppl.

NOW 28-29ppl -was 35ppl

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