THERE'S not much joy for dairy farmers in the CAP Reform package - that was the conviction of the many milk producers at a recent meeting

The get-together, at Hawford, near Worcester, was one of a series of roadshows laid on by the Milk Development Council and the NFU around the country to help dairy farmers plan the best way ahead for their businesses.

First, pessimistic farmers were reminded they had someone on their side.

"The Milk Development Council is your own organisation," said David Homer, Wiltshire dairy farmer and MDC council member.

"You pay for us by the levy of 0.6 pence on each litre of milk sold. Our task is to work for you."

This was a telling point for many dairy farmers, who are feeling the pinch, yet have no option but to pay the levy, probably amounting to several hundred pounds a year.

Andrew Richards, NFU Senior Regional Technical Adviser, summarised the CAP Reform proposals for England as they affected dairy farmers.

"There are new DEFRA decisions every day, as the details are being worked out," he said.

"In such a fluid situation you need a consultant to advise you on business decisions.

"The intervention support for butter will be suspended. The dairy premium is set to increase in line with the intervention price cuts in 2005 and 2008. The premium will be based on the amount of milk quota held at the end of March this year. The dairy premium will be decoupled and will form part of the single farm payment.

"The historic component of the single farm payment will be based on the area of land that is occupied in 2005. It will be vital to register land held in 2005. If it has not been registered there will be no entitlement to the payment.

"By the eighth year, large dairy farmers will find their single farm payment down by around 17 per cent. This is a serious concern. On the other hand, the payment to small producers will have shown some increase.

" 'Modulation' is the euphemistic term for erosion of subsidy payment. The EU modulation deduction is set at 3 per cent in 2005 and 7 per cent from 2007 onwards. The UK modulation deduction is yet to be determined but will further erode the payment.

"The single farm payment to each farmer will be conditional on his 'cross compliance', involving maintaining the farm land in good heart and safeguarding the environment.

"Details of a code of good agricultural practice are to be announced, but already there are 18 European regulations which must not be contravened."

The MDC Chief Economist, Ken Boyns, forecast an initial cut in the milk price of 4 per cent.

"You will need to keep the costs of production low", he stressed.

"There are three markets for milk in this country.

"Apart from the very small niche market attracting premium prices, the domestic liquid market is by far the biggest sector with 10 billion litres, while the commodity market going mainly for cheddar cheese and butter accounts for four billion litres of milk.

"At present, the commodity market is driving all milk prices, with those buying for the domestic market paying what they have to and no more. The supermarkets are, of course, very competitive, and dominant as buyers of liquid milk.

"We want to see the supermarkets actively marketing milk, not just treating it as a commodity that everyone must buy and usually sited at the far end of the store.

"Experience has shown that a better layout in the store, with attractive displays emphasising the value of milk, has been successful in increasing milk sales by three per cent, a significant advantage to the supermarket.

"Our aim is to reduce the commodity market sector. There are innovative ways of increasing the producer's return by adding value. Flavoured milk doubles the price, while branding the product can treble it. Speciality brands of quality cheeses and yoghurts help to reduce the volume of milk going into run-of-the-mill cheddar at the bottom end of the market.

"The Milk Development Council spends half of its levy on market development. It lays out £4 million on match-funded projects ..... a sizeable amount, yet puny compared with Nestle's £70 million spent on advertising!"

In the ensuing lively discussion, Geoff Goodman was vehement in his urge for a positive message for dairy farmers.

"We must talk the price of milk up!" he stressed.

Gerard Poulter reminded the audience that the introduction of milk quota in 1984 has led to a reduction of 10 per cent in the total volume of milk produced. The result was that no less than 80 per cent of production went for liquid sales and prices to the farmer were boosted.

"The message this sends is that increasing total production is against the individual farmer's interest," he said.

Pursuing this point, someone suggested "Why not use our levy money to buy up quota and take it off the market?"

A few years ago, such a suggestion would have been scoffed at. But such is the nervousness in the industry these, dairy farmers are ready to consider anything.