27 November 1998

Some change for the better

Price changes in this months

milk price review show some

signs of improvement.

Stephen Bates of Wye

College provides the detail

IN October 1995, a year into the deregulated milk market, the simple average of all prices surveyed in our Milk Price Review was 25.52p/litre.

By October 1996 this had risen to 26.25p/litre, yet a year later it had dropped almost 5p. Today, that average stands at 20.19p/litre, a 23% fall in two years.

Clearly this is a simplistic view. Our prices only show what would be paid for an imaginary standard litre. The myriad bonus adjustments may mean individual farmers are better or worse off. Supply contracts have also changed. But, the magnitude of such price reductions remains, illustrating the predicament many dairy farmers now face.

The general economic climate is still serious. The downturn in the global economy, particularly in the far east and Russia, limits the scope for EU exports and intensifies competition in other dairy export markets and within the EU itself. The strong £ also attracts imports and reduces EU support prices.

The specifics of this months milk price review provide mixed signals. Southern Co-operative Dairies, for several months the highest payer in our table, has reduced its price from October deliveries, bringing it more in line with competitors. Its butterfat price drops from 2.63p to 2.456p a %, and protein falls from 3.16p to 2.974p a %.

Avonmore Waterfords former Avonmore contract also reduced its base price for milk of 4% fat and 3% protein, from 20.1p/litre to 19.6p/litre. Butterfat adjustment has been cut from 0.3p to 0.2p for every 0.1% over the 4% base.

Milk Marque remains at the foot of our table, although it has begun to pay a new monthly trading bonus. For October deliveries this amounts to 0.041p a % of butterfat and 0.07p a % of protein. For our standard litre, this represents a bonus of 0.4p/litre. In addition, Milk Marques bactoscan top band is widened slightly, such that counts under 65,000 attract a top band 0.2p/litre bonus.

Nestlé has also removed its -0.1p/litre transport litreage charge and instead introduces a bonus for larger volumes of milk, ranging from 0.1p/litre for milk volumes of 2000 litres a day, up to 0.5p/litre for volumes over 6000 litres a day.

Avonmore Waterfords Lockerbie site also increases its butterfat and protein rate and top band TBC and SCC now receive a 0.1p/litre monthly bonus, rather than the 12 monthly 0.2p/litre quality bonus.

Wyke Farms also increases its butterfat rate and its protein rate and widens its bactoscan range; counts of less than 50,000 are now classed as top band, attracting a bonus of 0.1p/litre.

The company has increased its transport charge from £4 a stop to £6. But, it has also introduced a new monthly volume bonus ranging from 0.1p/litre for 500,000 litres a year to 0.5p/litre for 1,300,000 litres a year.

These changes do show some signs of slight improvement. But, two big events over the coming months will have a significant effect on the way milk prices develop over the next year.

The first is Milk Marques new selling round in January 1999 (under existing rules) and the second is the Monopolies and Mergers Commission report into the dairy sector, due for public release about March 1999. In reality, it will not be until the results from these are know, that the uncertainty within the sector may begin to ease. &#42