25 September 1998

MM announces trading bonus

MILK Marque has revised its payment structure to farmers after the August selling round.

The co-op is retaining its standard litre price of 18.2p, based on butterfat at 1.88p a % and protein at 3.18p a %.

It will now add a "trading bonus", to be paid monthly. This will result in a modest increase in the farm gate price, says MM.

One of the reasons behind the move is that MM now has to sell almost a quarter of its daily 15.6m litres of milk onto more volatile short-term markets, so accurate price predictions are tricky.

Bids were received for 83% of the supplies on offer in the selling round, about 11.3m litres a day. Of this, about 8.3m litres a day (53%) was sold into the familiar six-month contracts. This should realise about 20.7p/litre, though index-linking of some prices means that value may change.

A further 2.89m litres was sold on the new capacity contract, where buyers who contract process milk for MM can buy it at an agreed price. Although MM will not reveal the exact prices achieved, analysts predict such supplies may be worth up to 1p more than the intervention milk price equivalent, about 19.4p/litre.

The remaining milk – the 2.3m litres left unsold – has to be added to 2m litres already earmarked for short-term markets including further contract processing, sealed bids and spot markets. Recent sales for October suggest values at or near the six-month contract price may be expected. Overall, trade sentiment is that a farm gate price increase is likely to be small, probably less than 0.5p/litre.

The trading bonus will be paid the month after the milk is sold, and will be based on constituent values. Hygiene, cell count and other bonuses will continue to be paid in the normal way. &#42