Retail prices for liquid milk in 2011-12 reached their lowest levels for more than seven years, according to a report by DairyCo.
“Price promotions on liquid milk meant retail prices were down to 55.5p/litre, 4.6% lower than the previous year,” it said. At the same time, farmgate prices were 11.6% higher than the previous year, squeezing processors’ margins and resulting in the spate of recent farmgate price cuts.
“Unless there is significant change in the structure of the liquid milk market to alter the balance of power, it is likely that processors’ gross margins will remain under pressure.”
Global milk production was originally anticipated to grow in 2012. “However, a combination of falling farm profitability and challenging weather has meant that production may fall below these forecasts,” it added. EU production was 2% ahead of 2011-12, but was now past its peak and declining. American production was also ahead of last year but drought and high feed costs would curb supplies going into 2013. And forecast drier weather in New Zealand could curb grass growth during their spring and summer.