Milk prices reached a record 29.51p/litre for United Dairy Farmers‘ July auction, up by 1.6p/litre on the month.

It was the third consecutive month of price rises, and put values 4.7p/litre higher than the same time last year, said chief executive David Dobbin. “Good demand, reduced milk supplies and a weaker sterling/euro exchange rate helped deliver this stronger auction price, in spite of recent falls in powder and butter,” he said.

“Local milk production is now reducing steadily as we move toward the autumn trough in our supplies. We had 43m litres of August milk for sale in this month’s auction, compared with 50m litres last month and 57m litres at peak a few months ago. This tightening in milk supply was a key factor for the improved auction price.

“However, Fonterra are now starting to forward sell their peak output and as a result powder and butter prices are falling. If Fonterra auctions continue to drag prices lower this will eventually have an impact on United’s auction price, regardless of any tightness in milk supply.”