Average farmgate milk prices remained virtually unchanged in February at 33.85p/litre, according to the latest data from DEFRA. However, price cuts could be on the horizon, with dairy commodity markets falling sharply in March.

The Dairy Group’s market price equivalent, based on a basket of dairy commodity values, fell by 1.09p/litre on the month to 31.2p/litre, mainly due to falling liquid values. At that level, the MPE was 1p/litre up on the year, but 2.27p below the high reached in September 2013.

“Globally rising production is weakening markets, as the northern hemisphere spring flush begins – and there are strong indicators for a continued rise in EU production in 2014,” said director Nick Holt-Martyn.

He expected UK production to reach 13.7bn litres this quota year, 5.7% up on last year. “The new quota year is likely to start apace, with our forecast for April around 1.268bn litres, +13.5% on 2013.”

Mild cheddar values dropped by £100/t in March to £3,300/t, with skimmed milk powder weakening by £25/t to £2,725. Butter firmed by £25 to £2,900/t, while bulk cream jumped by £50 to £1,380/t.