The price that farmers are paid for their milk will rise next year, which coupled with an increase in Guernsey Dairy's operating costs will see the wholesale gate price rise by 6½ pence a litre from 6th January 2019.
Farmers will also share an extraordinary lump sum payment of £156,000 from Guernsey Dairy towards increased costs that were incurred due to the unusually wet conditions in the spring and extended dry summer, which resulted in reduced pasture being available. As a result, farmers had to introduce winter feed stocks earlier than normal, coincidental with escalating worldwide feed and fertiliser costs caused by widespread drought conditions.
This additional financial support for 2018 will be funded from Guernsey Dairy's reserves, so will not directly affect the wholesale milk price. Jersey farmers recently received a similar support package, understood to be worth £350,000.
Of the 6½p per litre wholesale price increase, farmers will receive 4¼p. That uplift in the producer price takes into consideration the next tranche in the reduction of the Dairy Farm Management Payment Scheme approved by the States in 2014 and also acknowledges increasing farm costs that are not covered by the extraordinary lump sum payment.
The annual agreement follows negotiations between the Guernsey Dairy Management Board and the Guernsey Farmers' Association. As the retail price of milk is no longer fixed, it will be for milk distributors and retail outlets to decide whether to absorb the increase, in part or in full, or pass it on to their customers.
Guernsey Dairy General Manager Andrew Tabel said:
"The negotiated settlement limits any increase in the retail price of milk by recognising and apportioning the exceptional costs incurred by farmers in 2018 and remedying them separately. This acknowledges and recompenses farmers in light of the difficult and challenging year caused by the prolonged dry weather and escalating feed and fertiliser costs; resulting in the use of winter feedstuffs during this period."
"The extraordinary payment of £156,000 - equivalent to 2p per litre - will be paid from the Dairy's cash reserves. Recompensing the farmers in this way mitigates the full impact of the Gate Price increase for our customers."The latest settlement follows detailed negotiations with representatives from the Guernsey Farmers' Association and included detailed analysis of production, processing and packaging costs. It also recognises the importance of continuing to reduce the operating cost of milk production whilst acknowledging the requirement to reinvest in order to preserve and sustain a viable dairy industry in the island."
Guernsey Farmers' Association representative Dave Cowley said:
"The GFA is pleased that it has reached a settlement for the revised producer price for 2019. The farmers put forward a fair case for this increase which covers costs as well as the next reduction of the Dairy Farm Management Payment. The farmers are always conscious of the impact a price rise has on customers and therefore try to keep their costs to a minimum being as efficient as they possibly can within the constraints of farming on an Island."