11 August 1995

Producer price unsure as MM wraps up sales

By Philip Clarke

MILK Marque has now completed its selling process at prices ahead of last years, although doubts remain over how much of this extra will be returned to farmers.

Having already sold a claimed 97% of supplies in the first round of bidding at prices 0.5p/litre up on last year, it then moved into a further round for the remaining 220m litres at 0.15p/litre less money.

This was completed on Monday (Aug 7) with Milk Marque reporting a slight over-demand by dairies. But it was still too early to say what this would mean in terms of prices to dairy farmers.

It seems certain, however, that any increase from November (when the new contracts take effect) will be substantially less than the 0.5p/litre passed on to the trade.

Dairy consultant Mike Bessey points to the effect of "trading down" by buyers who have come to realise they do not need to pay for the highest priced contracts in order to get a relatively secure supply. Last year these "demand led" contracts accounted for 35% of Milk Marques sales, but this time round they amount to just 14%.

As a result, Mr Bessey estimates the average Milk Marque realisation to be close to 26.16p/litre from the first round of bidding – just 0.15p more than last year. "After allowing for the lower priced second round, there is little doubt in my mind that Milk Marques return will be almost unchanged from last year. The honeymoon may now be over"

A slightly more optimistic view comes from Dalgety milk liaison manager Roger Trewella who believes the spot market that Milk Marque will be operating again next year will boost returns.

Spot market fluctuated

"The spot market has fluctuated from less than 20p/litre to almost 30p/litre since vesting day," he says. "But I believe it will now stay firm as dairy companies, who have traded down to supply led contracts, will turn to the spot market to top up their supplies."

As such, Milk Marque members can expect anything from 0.2p to 0.5p/litre more in their 1996 milk cheques, he suggests.

&#8226 Latest milk production figures from the Intervention Board confirm the downturn in July deliveries due to a combination of drought and higher cullings. Adjusted for butterfat, monthly supplies were 0.45% below quota, but cumulatively the UK remains 2% over quota.