By Robert Harris
MILK Marque has launched its January selling round, which, if successful, would raise farmgate prices by about 0.5ppl. But whether processors will be willing to pay more remains in doubt.
Although Milk Marque has not ruled out a further round at lower prices if processors stand off, it is in confident mood.
Two Green Pound revaluations last autumn raised the intervention milk price equivalent (the support value for butter/skimmed milk powder) by 0.8ppl.
Milk Marque managing director Paul Beswick says this, and firmer commodity prices over the next few months, means the co-op should build on last summers price rise.
The cheapest contract, Varying Supply, has been raised by 0.7p to 21.2ppl. Milk Marque is also trying to raise income on the less popular, higher priced contracts.
The Premier contract has been reduced, by 0.8p to 22.5ppl, and mid-priced Ex-farm Profile supplies by 0.3p to 21.5ppl. Milk Marque hopes the move will increase the number of bids and therefore income.
“These prices are aimed at clearing the market,” says Mr Beswick. “Dairy companies are already demonstrating they are willing and able to pay,” he adds, referring to recent buoyant spot market prices.
Sweeteners to the trade include greater certainty of supply on the cheapest contract and tailored contracts to meet individual customers requirements. Farm assured milk is also being offered for the first time.
Dairy companies have until 8 February to bid for the 12.8 million litres a day on offer. Up to 2m litres a day will be offered on daily and monthly short-term markets.
“Dairies will make their own decisions on how they react to this,” says Jim Begg of the Dairy Industry Federation.
“I am surprised that Milk Marque has chosen to increase the price against the market trend which is not positive and has an uncertain outlook.” And a Unigate spokesman described the 0.7ppl price increase as unjustified.
Roger Metcalf of Agrifood Consultants suspects bidding may be thin – he also reckons commodity prices will remain under pressure.
As Milk Marques market share in England and Wales has now dropped below 49% most of its milk is now used for mild cheddar, butter and skimmed milk powder.
But assuming last summers bidding pattern is repeated, Milk Marque would realise 0.5p more for its milk, at 21.24ppl. That is over 2ppl more than the intervention milk price equivalent, he notes. “No dairy company can afford to pay that.”
If, as he suspects, Sterling strengthens against the Euro, then the IMPE will fall further, increasing the financial risk to purchasers.