14 March 1996

MM announces 2.5p/litre pricecut from April

By Philip Clarke

sClarke

MILK Marque is cutting its standard litre price to members by 2.5p from April, in anticipation of substantially lower returns from the marketplace.

This partly reflects the disappointing results of the last selling round, which saw just 74% of the co-ops supplies sold at prices about 9% lower than thosecurrently being paid. The remainder will have to be disposedof on the weaker short-termmarkets.

"The strength of sterling, which has risen by 22% over the past year, has cut the cost of imports and made our exports less competitive. Progressive green £ revaluations have resulted in the EU target price for milk dropping by about 2.8p/litre in the past nine months," says a Milk Marque statement.

Another green £ revaluation on Mar 29 is likely to knock another 1p/litre off spot earnings.

But as well as the revenue side, the co-op has also had to revise down prices to accommodate the relentless rise in butterfat. "In December, the average Milk Marque members price was 0.55p/litre higher than thestandard litre price because ofhigh compositional quality."

The upshot of all this is a 10% cut in milk constituent values, taking butterfat down to 2.28p a % and protein down to 3.84p a %. For a standard litre of 4.1% butterfat and 3.3% protein, this equates to a new price of just 22p/litre.

From this has to be deducted the £13.50 a day marketing charge, offset by the £5.50 a day bonus for those on every other day collection. In addition, Milk Marques new quality bonuses start on Apr 1, paying 0.2p/litre for Bactoscans below 50,000/ml, 0.2p/litre for cell counts of under 150,000/ml, with an additional 0.2p/litre for "elite" milk which is continually in the top hygiene bands.

Under volume related pricing, smaller producers will be hit the hardest. A 40-cow herd delivering, say, 800 litres a day on every day collection with no quality bonuses or deductions will get just 20.31p/litre for a standard litre from Apr 1.

This compares with 22.47p/litre for the Milk Marque member on every other day collection, who is also in the 300 Cow Club and achieves the full 0.6p/litre quality bonus.

Some farmers have questioned the need for prices to fall at a time when EU butter and skimmed milk powder markets have been improving. (SMP prices have risen almost 20% in the last six months and butter has been boosted by Russian demand).

But apart from the inevitable delay factor, the strength of sterling has prevented UK traders from sharing in the commodity market improvement, said a Milk Marque spokesman.