MILK Link has nearly finished its Spring round of member meetings at which we have had the opportunity to speak with many hundreds of our members across the South West.

These meetings give us an invaluable opportunity not only to tell our members of the progress we are making, but also to hear at first hand about the issues that concern them. As such, they provide a unique snapshot of the confidence of the dairy industry as we enter the new milk year.

The dairy industry remains a challenging one for all involved. Nevertheless, compared to 12 months ago the mood amongst our membership is undoubtedly much more positive. Primarily, this is due to the fact that during the intervening period milk prices have increased by some 40%, moving from being below the cost of production to a more sustainable level. At the same time, members have started to see tangible returns from their investment in Milk Link as the financial strength of the business they own increases. Last May, members received around 7% return on their Members' Qualifying Loans and the Milk Link Board is confident that it will be able to return at least 10% from the 07/08 trading year.

However, the optimism being expressed by members is tempered by a number of concerns that are currently facing all dairy farmers. Greatest amongst these is the massive increase in input cost which in some cases have doubled or trebled over the last year. Fertiliser, energy and red diesel are three examples of inputs that have risen sharply in price. Of course, many of these cost increases do not only apply on-farm. Energy and diesel price rises have also meant milk collection, processing and distribution now cost a lot more. At all the member meetings Milk Link has not only highlighted the need to pass these costs through the supply chain wherever possible, but also to continue to drive down costs within our business. With regards to the latter, members were briefed on a range of initiatives being implemented to increase the operational efficiencies of our creameries including the benefits of a major investment programmes at our Taw Valley & Oswestry facilities and the restructuring of our long life milk business.

There was also much discussion about future trends in dairy commodity markets. Here again the news is mixed. On the downside world and European dairy commodities have weakened over the last few months and most are now considerably below the historic highs witnessed in the second half of 2007. In particular whey prices, which had reached around £950 per tonne in the Summer, have now fallen back to a current level of £400p/t, partly as a result of North American production increasing sharply. However, most dairy commodity markets, having declined, now show signs of stabilising at importantly a level much higher than 12 months ago. In addition, milk production in major dairying regions such as the EU and Australasia remain at historically low levels.

All in all, the meetings were very positive and the attendance was the highest for sometime. The over-riding message from these meetings has been that whilst returns have improved sharply since last year, confidence amongst dairy farmers is still somewhat fragile. As such we, and indeed the whole industry, need to remain absolutely focused on securing a long term and sustainable future for dairy farming.