Commodity price fall signals farmgate price fears

Dairy commodity prices have dropped sharply, resulting in a steep fall in The Dairy Group’s Market Price Equivalent in April.

The MPE is calculated from weighted actual wholesale prices for liquid milk, cheese, butter and powders after processing costs across 90% of the UK market utilisation of milk.

Although cheese values had remained stable, lower skimmed milk powder, cream and butter returns meant the MPE fell 0.92p/litre on the month, to 25.79p/litre – 2.9p/litre down year-on-year. Higher milk production was behind the drop in global commodity prices, raising the prospect of EU intervention this summer, said director Nick Holt-Martyn.

However, the domestic picture was rather different, with the worst April weather for at least 10 years stopping the spring flush in its tracks.

Farmgate prices were already under pressure, but there was limited room for cutbacks due to high production costs of about 30p/litre, he added. “With the UK now 13th in the EU price league the gap between production costs and market returns will raise concerns about the ability of the UK to suffer large cuts in single farm payments. There is little confidence that markets can deliver sustainable milk prices.”

market report