Despite higher retail sales, overall demand for milk and all other dairy products in the UK is currently running around 2m litres per day lower than it was before the Covid-19 lockdown. This reduced demand comes from lower foodservice sales; in addition processors are still struggling to find a home for excess milk.
During the spring in the UK, factory output is normally driven by processing capacity and milk supply rather than short-term demand. The only additional challenge for dairy processors during the first few weeks after lockdown has been the impact of staff absence. We should also be mindful that the processing capacity in the country relies on all factories running without incident. A site breakdown, particularly if repairs are difficult to source as a result of the lockdown, can significantly reduce processing capability and lead to an increased risk of excess milk needing to be disposed of.
The government is still in negotiations with dairy farmers to see how they can help further with cash flow problems and speed up the Business Interruption Loan Scheme. These are very tough times for the dairy industry as we enter peak production.
For most of our dairy supply partners it has been the same story for the whole of April with volumes on vehicles reducing every week and, in some cases, more and more drivers being furloughed. With the increases we have seen in milk and eggs, we could potentially see other dairy lines rising in the foreseeable future. We will continue to support the industry and our dairy suppliers, delivering the best option for our customers.