Farmgate milk prices should rise in January, according to the Dairy Group.

Sharp increases in the price of cream, butter, cheese and skimmed milk powder have boosted its rolling Milk Price Equivalent for the first time since July last year. “The rise suggests it is time for the next milk price move, which should be up,” says director Nick Holt-Martyn. “The time-lag between market returns and farmgate prices indicates a January increase.”

Although cream values have slipped back from their peak, strong commodity markets will encourage a switch away from cheese production in Ireland, helping to firm the cheese market over the next three months, he says. Along with lower EU milk production and adverse weather in the Southern Hemisphere, this should stabilise markets for the next six months.

“With sterling stable at its weak position, even if commodity prices ease later in the winter, UK prices should now show an increase. Farmgate prices have to follow market returns if UK dairy farmers are to invest for the future.”