MILK PRODUCTION has accelerated since the decision by many dairies to raise the threshold at which milk cheques are held back.

In the last weeks of January, volumes delivered overtook production in the same period last year, with 3.1m litres more in the week ending Jan 22.

Charles Holt of the Farm Consultancy Group warned that milk prices could suffer if a glut of milk came onto the market in the closing months of the milk year.

“A year ago, people were cutting back quite hard, and this year they‘re pushing on quite hard.

“We‘re likely to produce a reasonable amount of milk in January, February and March, and it leads one to think about how much of a surplus of milk there‘ll be this spring.

“Spot markets could fall if there‘s a large surplus, but we‘re still behind production compared to two years ago.

“Milk prices fell away in spring 2003, but there was no Westbury then, so there was nowhere for the surplus milk to go.”

With the super dairy at Westbury able to turn surplus milk into butter and skimmed milk powder, prices could hold better, he added.

But commodity prices have already begun to slip back from December highs of £1550/t of skimmed milk powder, and butter could soon follow suit.

SMP was trading down 10% last week (ending Jan 28) at £1400/t, with EU product now below intervention prices.

With the intervention campaign due to open on March 1, the market will become more oriented towards commodity production in the coming weeks.

The weakness of the dollar and the strength of south east Asian demand will help determine the wider market for EU product.

But values could receive a boost from news that New Zealand dairy giant Fonterra is cutting production estimates by 75,000t.