Domestic dairy faces growing competition from imports

A flurry of new trade deals with major dairy exporting nations is raising alarm in the UK, with the agricultural industry warning that they could start to undercut domestic producers over time.

Australia, New Zealand, and most recently India have all been granted greater access to supply dairy products to the UK market.

The dairy sector is relatively well supported at present in the UK, with average farmgate milk prices at 43.55p/litre in June and consistent returns for most producers.

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UK wholesale markets have also performed well, with butter trading at £6,150/t in July.

Trade deals are not expected to impact markets too much in the short term, with initial import volumes forecast to be low.

However, phased tariff quotas could mean that these deals will have an ever-increasing impact on domestic markets throughout the next decade.

NFU Dairy Board chairman Paul Tompkins said: “The national dairy board has expressed its frustration that access to UK dairy markets has again been granted to another major dairy producing country, this time without dairy farmers receiving greater access for British cheese and dairy products in return.

“The cumulative impact of ever greater access to our domestic food markets cannot be overlooked and the board is clear that a precedent must not be set for future trade negotiations.”

NFU president Tom Bradshaw added that the big concern with the India deal was that the UK’s dairy markets had been liberalised yet again, however he noted that there could be good export opportunities for other sectors, such as lamb.

The UK already exports roughly £2.7m worth of dairy products to India each year and plans to increase these volumes.

Mr Tompkins said that reduced tariffs on UK infant formula and some protein concentrates could provide some additional export opportunities for the UK dairy sector moving forward.

Analysis of the UK-India trade deal by the AHDB established that India will reduce tariffs for 90% of UK exports, while the UK will eliminate tariffs on 99% of imports from India.

David Swales, head of economics and analysis operations at the AHDB, said: “There could be market opportunity for UK value added dairy products, notably cheese and butter.

“During the FTA negotiations, the UK aimed to reduce India’s dairy tariffs or secure generous tariff rate quotas. However, reports indicate that India excluded duty concessions on dairy from the final agreement to protect its domestic dairy industry.”

Potential US deal

The US dairy sector also appears keen to secure increased market access to the UK, which has raised further concerns for domestic producers.

Mr Tompkins said: “US pressure for market access, despite lower costs, variable welfare standards across the States, use of hormone treatments on dairy farms, and differing approaches to antimicrobial usage, risks irreparable damage to UK dairy.

“Any liberalisation of market access to the US would be a complete U-turn on government pledges to safeguard our high production, animal welfare and food standards.”

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