Reuters - Video

Edition: US | UK | IN | CN | JP

video Finance Videos

Why is milk cheaper than water?

Tuesday, January 13, 2015 - 01:43

Falling commodity prices, supermarket price wars and a ban on diary imports by Russia has caused the price of milk to become cheaper than water. Hayley Platt reports on the impact it’s having on UK dairy farmers.

▲ Hide Transcript

View Transcript

Mike Gorton runs a diary farm in the north of England. It used to be one of 20 in the area, now it's the only one left. Over production, supermarket price wars and an import ban on dairy products by Russia has caused the price of milk to crash. Milk is now cheaper than bottled water. SOUNDBITE: Mike Gorton, dairy farmer, saying (English): "If I don't take any money out it costs me 24.5 pence to produce a litre of milk." Milk in the UK is 18 percent cheaper than a year ago - some farmers are getting just 20 pence a litre. No surprise then that farmers are leaving the industry - numbers have fallen by a fifth over the past five years. At the moment Mike isn't even being paid for the milk he produces. First Milk, the co-operative he sells to, is suffering cash flow problems, deferring payment to its 1,300 producers for the next two weeks. The National Farmers' Union says the situation is unprecedented. SOUNDBITE: Gary Mitchell, National Farmers' Union (NFU) Scotland, saying (English): "This is really going to dent a lot of confidence at the moment. People just can't understand why it's happened so fast. We've never seen as big a crash in such a short period of time in a number of years." Some dairy farmers, like Paul Appleby have diversified. He now makes products from his milk. SOUNDBITE: Paul Appleby, Appleby's Cheese, saying (English): "Fortunately we make a third of our milk into cheese, so that does protect some of our margin but the price reductions that are happening at the moment has dramatic affect on our profitability." First Milk says it appreciates the problems it's causing. But with milk prices around the world down more than 50 percent over the past 12 months it had little choice.

Press CTRL+C (Windows), CMD+C (Mac), or long-press the URL below on your mobile device to copy the code

Why is milk cheaper than water?

Tuesday, January 13, 2015 - 01:43