28 November 1997

Full extent of milk price cut apparent

THIS months Milk Price Review shows for the first time the full extent of the cut in prices – talked about since last summer, but only fully realised with the arrival of milk statements in the past couple of weeks.

Combined with the end to seasonality premiums for many of the buyers, the drop month on month has been a severe one.

Milk Marque set the trend, having lowered its butterfat and protein payments 9% and removed the 0.5p/litre seasonality payment for September deliveries. Based on our standard litre, and assuming every other day collection, this takes the price down to 19.7p/litre from 22.2p/litre.

One of the biggest falls, however, has been for suppliers to South Caernarvon Creameries. They received only 20.73p/litre for their October deliveries, almost 4p less than September, as the company dropped its constituent values 8% and reduced its seasonality premium from 2.5p to 0.5p.

Similar reductions are apparent from many buyers, though for some suppliers the pain is yet to come. For example, Waterford is not due to cut its prices until next month, when its base price falls to 19.95p/litre from 21.95p/litre. Wiseman Scotland and Wiseman England both knocked 1p/litre off October values, but are due to take another 1p away from this months deliveries.

Lancashire Dairies is due to lower its price another 0.5p/litre next month. And Unigate, which has not changed its constituent values for October deliveries, introduces its new payment scale – based on stockmanship and farm assurance, as well as milk quality and constituency – this month.

The downturn in milk prices is undoubtedly good news for the major dairy companies who, in recent weeks, have reported a substantial profit recovery, even before the latest raw material cost reductions. The next six months should be particularly lucrative.n