Industry voices concerns over dairy hardship fund as applications open

As the UK’s Dairy Response Fund opens for applications, some in the industry are concerned about the actual impact of the scheme.

As part of the Government’s fund, which was originally announced at the beginning of May, dairy farmers who have lost more than 25% of their income over April and May owing to coronavirus disruptions could be eligible to access funding. The scheme has no cap set on the number of farmers who can receive support, nor on the total funding available.

It aims to help farmers to maintain production capacity and sustain their business without impacting animal welfare. The announcement of the fund was originally welcome news as it came at a time when dairy farmers were being forced to throw away perfectly good produce following the closure of restaurants, bars and cafes during lockdown.

However, some in the industry argue that the hardship fund simply isn’t enough to help cash-strapped farmers more than three months after lockdown.

“Unfortunately, the £10,000 is a drop in the milk ocean compared to the revenues lost by the dairy farmers hit hardest by the pandemic, and the complexity of the rules will mean that some of those might not actually qualify,” said Brian Harvey, partner and head of agriculture at regional accountants and business advisers PKF Francis Clark, covering South West England.

“I also question why the 25% eligibility criteria. Does this mean that drop in the milk price of any less than this is deemed to be acceptable? A margin price drop of 1p or 2p per litre can mean the difference between a profit or a loss, and ultimately a business surviving or failing.

“I guess that the real issue here lies in the fact that dairy farmers have fixed costs of production and that they already toiled away with paper-thin profit margins even before the crisis. Any further general downward pressure on the milk price will have a further detrimental knock-on effect on the industry, and for some, will be the final straw.

“You could not furlough a cow for a few weeks or months in the same way that nearly nine million people in the UK have been to reduce the financial burden on the strained balance sheets of companies and organisations.

“The fund is no doubt well-intentioned. However, the issues we have seen have really highlighted the fragility of the UK dairy sector. To see thousands of litres of milk being thrown down the drain at a time when supermarket shelves were empty was a travesty.

“If the Government has a real interest in the dairy industry and wants to retain it for the future, then there are lots of questions across the whole supply chain that need addressing, and this will go well beyond a one-off hand-out for the few.”

Brian’s concerns have been echoed by others in the industry over the last few weeks. Shortly before applications opened, NFU dairy board chairman Michael Oakes also expressed concerns over changes to the qualifying criteria that meant some dairy farmers wouldn’t be eligible. NFU dairy adviser Phoebe Russell also called for specialist dairy producers, including those in the goat, sheep and buffalo sectors, to be part of the wider dairy hardship scheme.

Applications for the hardship fund will be open until 14th August, and can be submitted directly to the Rural Payments Agency. The fund will then be issued in a one-off payment of up to £10,000 in July.