27 June 1997

Outlook gloomy as penalties imposed

SEVERE seasonality penalties are hitting milk producers, taking prices into the "high teens" for many of them.

Among the toughest on May deliveries are Wiseman Scotland, Golden Vale, Southern Co-op, Wyke Farms and Milk Marque, all taking 3p/litre off their June milk cheques. But The Milk Group and Scottish Milk have gone a step further, imposing penalties of 3.5p/litre in an attempt to achieve a more level supply profile.

That is not the only change in this months Milk Price Review. We have also reduced the somatic cell count for our standard litre to 150,000, picking up the 0.2p/litre bonus paid by Milk Marque and other buyers under their quality incentive schemes.

Despite this, Milk Marque members on every-day collection are still getting just 18p/litre for our standard litre, rising to 18.5p/litre for those on every-other-day collection. Taking into account volume related pricing, we estimate a range from 17.3p/litre for a 40-cow herd on EDC with no bonuses, to 19.5p/litre for a 300-cow herd on EODC with full bonuses.

Prospects for any improvement in basic prices are not bright. Milk Marque is due to announce its opening quotes for its next selling round to the trade in July. With an estimated 90% of supplies from October unsold, and with no enthusiasm for its contract processing scheme, and with two green £ revaluations since its last selling round, expectations are that prices will have to fall further.

About the only grains of hope are that the spot milk market is reported to be firming (though this is entirely due to seasonal shortages) and that the butter market is trading at a significant premium to the intervention floor price.n