The point is that the average dairy cow produces 7,000 litres of milk each year. I know! Astonishing isn’t it? Until recently farmers were getting just 18p for each litre. Now they are getting 27p. The extra 9p on 7,000 litres of milk is worth £630. Subtract from that the £200 or so extra that the farmer has had to pay for animal feed, but he is still getting a good £400 per cow that he was not getting before. Multiply that by a herd size of 200 cattle, and our struggling dairy farmer is struggling no more. £80,000 per year richer, he is checking out the cost of a new Range Rover, thinking that he might buy a new tractor, and certainly vowing to invest in a better class of feed for his animals and fertiliser for his land.
The outlook for dairy farming, according to Holmes, is ‘as bright as I have ever seen it,’ and if this rosy picture has not yet spread to other types of farm it can only be a matter of time. Suddenly farming is popular. Ten years ago investors started to wake up to the fact that there was a global shortage of raw materials to feed the Chinese manufacturing dragon. Now they are waking up the fact that the world needs more food.
Global demand for food on the rise
It is as simple as that. The global population is rising inexorably. The burgeoning middle class of Asia is no longer content to eat bucketfuls of rice and cabbage, with an occasional chicken’s foot as a treat. They want red meat, fruit, Mars Bars and all the other culinary delicacies that we take for granted in this country.
Tom Bulford, 20-year City veteran and former trader for Schroder Investment Management International