UK milk prices could start to ease if EU markets continue to follow the global downward trend.
With strong milk production leading to rebuilding of stocks and Fonterra’s auction values dropping for the past five consecutive sales, the outlook was bearish, said a report by DairyCo
“Wholesale prices are generally trending downwards and some buyers are adopting a ‘wait and see’ approach, which is restricting short term demand,” it added.
The Dutch co-operative FrieslandCampina had reduced its guaranteed milk price for April by €1.25/100kg to €41.25/100kg, reflecting weaker wholesale markets. “In the EU where farmgate prices are more closely linked to commodity markets, any sustained pressure on processor margins is likely to be reflected in farmgate prices.”
UK prices were currently more influenced by strong competition for milk supplies, but if wholesale returns continued to decline it would impact on farmgate values, said the report.
With Arla’s milk price set in Europe on the basis of returns from its international markets, any reduction in its price would release some of the pressure on other processors competing for milk supplies.