UK producers bottom of Euro milk price table
By Philip Clarke
BRITISH milk producers are the worst paid in Europe for the second year running.
Latest figures from German statistics agency ZMP confirm UK milk prices at the bottom of the Euro league, despite the fact that converting them into ks makes them appear better than they really are.
Provisional estimates put the UK milk price for 1999 at k27.02/100kg, compared with an EU average of k29.17/100kg. This represents a drop of 2.8% on the 1998 figure.
"But British farmers have to live with sterling, not ks, which makes things even more uncomfortable," says Erhard Richarts of ZMP. In sterling terms, 1999 saw a 5.3% fall in milk price to 18.3p/litre average, the third consecutive decline. As well as the effects of currency, the demise of Milk Marque as an effective selling agency is to blame.
Italy tops the table with an average price of k34.19/100kg in 1999. But comparisons with other countries have to be treated with caution because circumstances are so different, says Mr Richarts.
Italy has a high return because costs are much higher. About 20% of milk goes into speciality cheeses, such as Parmigiano Reggiano, which have exacting demands on production standards. For example, only summer milk may be used.
But the price also reflects the quota shortage and the strength of producer co-ops, which pass back any added value to their members. Elsewhere, most EU countries have seen a drop in milk value. The biggest fall was in Holland – down 8.3% to k28.13/100kg. This reflects the bias towards cheese production, with the market operating at or below intervention for most of 1999.
"The Dutch also had no benefit from the recovery of skimmed milk powder prices in the second half of the year," says Mr Richarts. "Most SMP goes back into cheese production or for calf feed. They are more buyers than sellers of SMP."
Prospects for a recovery in milk prices look slim, especially for the UK. Sterling continues to take its toll, with prices 2.5p down on the same time last year.
But the Milk Marque successor co-ops, Zenith, Axis and Milk Link, have surprised some in the industry by announcing small increases for April deliveries, despite intervention values dropping 1p/litre since the last selling round in October 1999 (see p22).
"We have had constructive negotiations with our customers and achieved a complete sell out," said a spokesman for Axis. "Most of our contracts are for six or 12 months and there is a degree of index linking to currency."
There has also been less politics involved in the selling process, confirms dairy consultant Mike Bessey, though prices have also been boosted by savings in the new co-ops haulage operations. Combined with the April price drops from the main dairies, he expects the premiums for direct suppliers will be severely eroded. *