22 December 2000

Milk prices up, but the worst is not yet over

IT would be unwise to assume that the recent improvements in milk price means the worst is now over.

Ranald Fowler, farmer and chairman of Mole Valley Farmers, set the scene for his firms spring calving conference held at IGER, North Wyke, Devon, with that warning.

Price increases were just a temporary response to a shortage of milk, he believed, though he did concede that there might be a further rise in April if production was still below quota. A weakening of the pound against the k could also improve UK prices.

But he was convinced the potential for expansion of milk production in New Zealand, Australia, Argentina, Chile, Uruguay – all on low-cost systems – along with increased EU milk production after quotas were removed, would mean EU prices falling almost to world levels.

EU expansion eastwards could not take place with milk quotas in place, and so they would be removed. There was pressure to bring forward the EU dairy review to 2002, and once quotas were lifted EU production could increase by up to 30%, he suggested. That would bring prices down close to world level apart from "island protection" and a small premium from the big UK liquid market.

"Plan on the basis of 15p/litre," he said. That meant spring calving and maximum use of grazed grass. It was possible there might be a rapid nationwide swing to spring calving. That would present a challenge to processors and encourage a premium for winter milk. &#42