26 November 1999

Picture emerges after milk price reductions

THIS months milk price review provides firm evidence of how farm-gate milk prices compare following the recent round of price reductions, writes Wye Colleges Stephen Bates.

Most of the contractual changes in October relate to lower payments for butterfat and protein content. While the size of these reductions varies, the overall effect is a fall of 5-10%. The full effect of these price changes on a comparative standard litre is shown in our table.

Before seasonal adjustments, the average farmgate milk price in this table is 17.9p/litre, with most companies paying 17-18p/litre. But those producers not receiving top band hygiene and other bonuses will get far less.

These low prices are set to persist, at the very least, until the end of the milk quota year.

As far as the detail is concerned, Milk Marque is a typical example, reducing both butterfat and protein values by 5.6% to 1.68p and 2.82p, respectively (values quoted are for each %, and, in some cases, are rounded up).

Milk Group payments are down slightly less, to 1.9p and 2.88p while South Caernarfon Creameries has made a slightly bigger cut to 1.8p and 3.12p.

Those making smaller reductions include Southern Co-op, with a 1.5% cut to 2.42p for butterfat and about 2.9p for protein. Nestlés English and Scottish values are down a heftier 4% to 1.95p and 3.23p respectively.

Scottish Milk has cut its protein rate a fraction more to 3.04p, though butterfat is down by almost 5% to 1.74p.

Bodfari is among those making bigger cuts of about 7%. It now pays 1.82p for butterfat and 2.99p for protein. Express Dairies has made a slightly bigger cut to 1.54p and 3.04p as has Glanbia (Lockerbie), which now pays 1.57p and 3.02p.

Wyke Farms goes for a 7.5% cut, leaving butterfat and protein values at 1.71p and 2.94p, respectively. But Golden Vale now pays 10% less, at 1.87p and 2.66p a %. This equates to a significant 1.8p/litre cut in our standard litre.

As a result of these changes, the price for butterfat in our table now ranges from 2.42p (Southern Co-op) to 1.54p (Express), nearly 0.9p a %. Similarly, the price for protein in our table ranges from 3.23p (Nestlé) to 2.66p (Golden Vale), a range of 0.6p a %.

However, while these rates are important, there are an increasing number of other payments in the price mix. For example, Express Dairies now pays 1.4p/litre for milk in its top quality bands, while MD Foods pays 1.2p/litre.

Of those companies paying on a largely flat price, Express Dairies (Avonmore) has cut its base value by 9.5% to 17.1p/litre. Midlands Co-ops base price has fallen by 9% to 17.77p/litre.

Wiseman (England) has cut its base price by 5.7% to 16.45p/litre, whilst its Scottish base price has been reduced by 4.4% to 15.82p/litre.

Of those companies paying part constituent and part base price, MD Foods has cut its butterfat rate by 11% to 1.6p a %, but has kept its protein rate unchanged at 1p and only marginally reduced its fixed price element to 6.2p/litre.

Unigate has also reduced its butterfat rate by 10% to 0.85p and its protein rate by the same amount, to 1.16p. Its fixed price element comes down by 9.4% to 8.7p/litre.