26 March 1999

Expectation of fall in MM prices after latest selling round

DAIRY producers face the prospect of lower farmgate prices from May, following the completion of Milk Marques latest selling process.

A statement on Tuesday (Mar 23) confirmed the co-op had cleared over 90% of the 12.8m litres a day it had on offer from April – all of it on individual contracts with buyers. Any unsold milk will be added to the 2m litres already held back for short-term contracts and contract processing.

Since the deals have all be done behind closed doors, Milk Marque was unable to say how much it had realised from the market or what the implications would be for milk cheques.

It did confirm that the April price would be the same as this months, with a standard litre, (4.15% butterfat, 3.35% protein, top band Bactoscan and cell count), worth 18.85p/litre.

But every expectation is that prices will have to fall thereafter.

The completion of private deals this week follows the total failure of two previous selling rounds, the latter of which only saw 44% clearance of supplies at lower prices than it currently receives.

"The strengthening of sterling alone has knocked the equivalent of 1.3p/litre off intervention prices," said a Milk Marque spokesman. "We will give an indication of what this will mean for members as soon as possible."

Independent industry consultant Mike Bessey believes most of the deals will have been done below the 20.5p/litre offered to the trade for the cheapest milk in the last selling round. "Hearsay evidence suggests prices being fixed at around 19.5p/litre, though its impossible to verify these reports," he says. "What is clear, farm gate prices will have to go down."

Apart from the strength of sterling, Mr Bessey points to the weakness of the commodity markets and the likely glut of milk in the coming months.

On the continent, butter intervention stores have opened as low prices trigger the start of support buying. Skimmed milk powder is also being intervened, and a lack of Third country exports has led to whole milk powder weakening.

Dairy Industry Federation director general, Jim Begg, said he welcomed the fact that contracts had now been settled. He believed Milk Marque should be happy with the prices it had achieved, given that markets had been falling throughout the selling process.

Both the DIF and Milk Marque agreed that a new system was needed in time for the next selling round in the summer &#42