New milk year kicks off with a sharp price drop
By Robert Harris
MILK prices have dropped sharply at the start of the new milk year.
Seasonality deductions have had a big effect on April values, slicing 1-3p/litre off producers returns. But the ex-farm price continues to slide, too, due to the strong £, which has sucked in imports – especially cheese and butter – and continued pressure on world commodity prices.
Although producers will recoup some of the seasonal losses later in the year when bonuses kick in, many farmers, especially those supplying the poorer payers towards the foot of the table, will be making losses of 1-2p/litre until then.
There are signs that more producers are switching to spring calving to reduce the use of expensive bought-in feeds and make more use of grass. This is backed up by the Intervention Boards decision to add 60m litres to the April-July profile, and reduce the Oct/Nov profile by 42m litres (Business, May 14).
"If we continue with this trend, then the UK will start to conform with the European norm with the trough period being in December, January and February," says Roger Metcalf of Agrifood Consultants.
But processors are unlikely to alter seasonal payments to try to encourage a flatter profile, he believes, since none source more than 65% direct from farms. "It is cheaper for them to buy spot in the months when milk is short. This will put more pressure on Milk Marque, though."
It could be good news for direct suppliers, he adds. "Eventually, dairy companies will have to process all the milk they buy, rather than sell it out during peak production months. Dairy companies will become multi-purpose, adding value to all the milk purchased, thus improving their returns and payments to producers."
But several companies have cut their prices this milk year. Milk Marque now pays 1.86p a % for butterfat, down from 1.88p, and the protein payment is down 0.035p a % to 3.18p. June payments will fall further, to 1.78p and 2.99p a %, respectively.
The company has not paid an April bonus, and the Elite bonus for top-quality milk has ended. But top band Bactoscan has risen 0.1p/litre to 0.3p/litre, as does top band somatic cell count.
Midland Co-op remains this months top payer despite a cut of 0.675p in its base price, which now stands at 19.55p/litre. Cell counts below 150,000 now qualify for a 0.375p/litre bonus, but there are tougher penalties for lower bands.
Nestlé is paying 0.2p/litre more for top band Bactoscan. But it has raised its transport charge to £9.90 before VAT.
Golden Vale has also cut constituent prices, with butterfat down 0.04p to 2.126p a % and protein cut by 0.057p to 3.021p/%.
Scottish Milk has reduced its payments by twice as much, to 1.83p a butterfat % and 3.17p a % for protein. But it has announced a 0.2p/litre farm assurance bonus for six months, 60% of suppliers qualify.
Lastly, the protein content in our table has risen to 3.3% to reflect increasing farm levels. *