12 September 1997

2p cut in MM milk cheque will stretch smaller producers

By Philip Clarke

MILK Marque has confirmed it is knocking another 2p/litre off milk supplies from Oct 1, taking its standard price to just 20p/litre.

The drop takes the total fall this milk year to 4.5p/litre and, with no changes to marketing charges, will put particular strain on smaller milk producers.

A year ago a 40-cow man delivering 800 litres a day would have received about 24.2p/litre, after collection charges and before seasonality. But from Oct 1, 1997, he will be getting just 18.3p/litre – almost 6p less – after deducting the £13.50 daily fee (assuming no quality premiums).

By switching to every-other-day collection and getting his milk into the top hygiene bands (less than 50,000 Bactoscan and 150,000 cell count) he can raise his return to 19.4p/litre. But the chances are that still wont be enough to cover total production costs.

Milk Marque puts the blame for the price fall squarely on the strength of sterling over the past 12 months, which has forced support prices down by 20%. "The last revaluation alone took 0.8p/litre off values," said a spokeswoman.

In terms of constituents, the co-op will be paying 2.07p a % for butterfat and 3.49p a % for protein, a drop of about 9% for both. The average Milk Marque producer, with 1100 litres a day on EODC will be getting about 19.3p/litre, before any hygiene or seasonality adjustments.

But there is a growing hope that milk prices could now have reached the bottom of the trough.

Sterling is enjoying a period of relative weakness and there is no immediate prospect of another revaluation. Commodity markets are also firmer with butter and skimmed milk powder actually drawing raw material away from cheese producers.

Milk Marque has also confirmed a more positive response to its second contract processing tender, with UK and overseas buyers taking up most of the 2m litres a day it had on offer. It will, therefore, have only a limited volume to clear on the spot market, and even here prices are relatively buoyant.

"It will be some time before there is any improvement in producer prices, but things are unlikely to get much worse," said one observer.

Other milk buyers have been slow to issue their new prices. John Baverstock of Nestlé said he would be announcing prices next week, but thought most buyers would tend to follow the 2p/litre drop.

This is certainly the case for Unigate, which will continue to pay "Milk Marque plus 0.8p/litre" during October, before the firm introduces its radical new pricing structure in November. &#42