20 February 1998

Milk price heads for fall

UK DAIRY farmers will soon be getting little more than the intervention price for their milk, despite producing some of the highest quality supplies in the world.

That is the blunt message from ADAS Milk Cheque manager, Ian Powell, commenting on price and margin prospects for the new milk year starting in April.

"Last month we perceived that improved profits for dairy companies and higher world dairy commodity values would increase milk prices in the New Year," he says. "But the early indications from the latest Milk Marque selling round is for a further fall in milk price from Apr 1, estimated at 1 to 1.5p/litre."

Part of the reason is that dairy companies have been bidding increasingly for the cheapest Milk Marque contract on offer. In the current selling round, about 70% of bids have been for this contract, worth just 19.4p/litre. And the expectation is that this value will drop to 19p/litre – the Intervention Price Equivalent – before the process is complete later this month.

ADAS Milk Cheque results for December show how much margins have already been hit (see box). "Dairy farmers must take immediate stock of their position and put remedial measures in place to preserve fragile margins over the coming months," advises Mr Powell.

Evidence that farmers have already been doing this comes from dairy costings by Axient. Improving management techniques are driving yield and turnover up and costs down says Milkminder manager Derek Gardner.

Comparing Milkminder figures for Dec 1997 with Feb 1995, when milk prices were broadly similar, he notes that Milkminder herds have improved their turnover by 7% and their herd margin by 11%.

Over that time, yield a cow has increased by more than 500 litres to an average of 6650 litres – with all that extra milk coming from forage. And concentrate use has actually fallen. "The speed of change is really amazing and shows what can be achieved," says Mr Gardner. The combination of more cows, better milking and feed cost savings have clawed back almost half the potential herd margin lost during December.

Further significant improvements have also been seen in milk hygiene – a key area for counteracting falling milk prices. New data from NMR show that average cell counts (for 13,000 herds) fell by 8% in 1997, standing at 178,000 cells/ml. Over 40% of herds had cell counts below 150,000, so picking up price bonuses.

As well as farmers focusing on producing cleaner milk, the governments cull schemes have taken out many older, higher cell count cows, contributing to the improving picture, says NMR product manager Mike Squire. &#42

Milk prices continue to tumble. But farmers are tackling the problem by driving yields up and costs down, latest Milkminder figures reveal.

MARGIN CUTTERS

&#8226 Margin over purchased feed/litre down nearly 4p to 15.9p.

&#8226 Yield from forage unchanged – 7 litres a cow.

&#8226 Milk price down 4.7p to 20.25p/litre.

&#8226 Further milk price cuts likely.

ADAS current figures compared with Dec 1996