The region's dairy farmers have tightened their belts again as the milk price heads south. Rob Simpson, of the National Farmers' Union (NFU), examines the reasons behind the price slump, while Jessica Slee interviews a North Yorkshire farmer who is working towards a profitable future.

THE dairy industry has been beset by crises in recent years. Foot-and-mouth disease led to the slaughter of one in 20 UK dairy herds, while the BSE crisis resulted in the value of cattle plummeting by two-thirds overnight.

But the one factor which has had the most devastating effect on the industry is the price which farmers have been receiving for their milk.

Dairy farmers receive just 8p at the so-called 'farmgate' for every pint of milk they sell, whereas consumers pay an average of 36p for their daily pinta. The mark-up from farmgate to retail price is a whopping 350pc.

Almost three-quarters of dairy farmers have been driven out of the industry in the last 16 years by increases in bureaucracy, shrinking margins and a sustained low milk price.

But the fortunes of dairy farmers seemed to have turned last year - amid the heartache of foot-and-mouth disease - when the milk price climbed to the point that farmers could actually make a profit. Inevitably, it lasted for barely eight months, and producers suffered a 10pc price cut for their milk in April.

Steve Willis is a tenant farmer near Harrogate who represents dairy products in Yorkshire for the NFU. He owns 100 dairy cows and winces at the thought of another slump in prices.

A dairy farmer for just nine years, Steve worked as a herd manager in Northumberland for 17 years before committing his savings and his future to renting a farm.

But just a few years after he had bought his dairy herd, he watched in dismay as the value of his animals fell by two-thirds as a result of the BSE crisis.

The UK dairy industry's current lack of profitability is a long and complicated story which started with the break-up of the Milk Marketing Board - a statutory body set up to stabilise the industry and which bought all UK milk.

Since its demise, Government policy has meant that milk producers have had a particularly weak position in the market place.

And as much of the added-value dairy produce, such as cheese and yoghurt, is easily traded within Europe, dairy producers in Britain have been at the mercy of a strong pound since the mid-1990s.

"Dairy producers have suffered in the long terms from the break up of the Milk Marketing Board," Steven explained. "We have been left at a disadvantage when dealing with the powerful retailers and processors. But what we need now is rationalisation of the milk marketing groups so they can compete with the powerful groups in Europe, and in the global market."

While the nationalisation of the milk marketing groups is a long way away from his Harrogate pastures, he has joined other local dairy producers to negotiate better prices for the farm inputs.

The co-operative buying group allows its members to benefit from paying lower prices for animal feed, fuel and fertilisers.

The future is uncertain, yet Steve is adamant not to give up the way of life he loves: "When we look at how so many smaller family farms in France and Germany can thrive, one of the key differences is their willingness to co-operate with one another.

"Farmers in this country have to co-operate in the purchasing and marketing side if they want to survive. UK farmers are not good at working together, but this is the only way the industry can hope to succeed."

Updated: 09:28 Thursday, May 09, 2002