Dairy farmers supplying milk to supermarkets will have been buoyed by Tesco’s price announcement this week but all milk producers should be benefiting from rises in commodity prices.

Skimmed milk powder values rose a further 18% to £1700/t last month and are £300/t up on prices last March. This is 40% over intervention and has had a knock-on effect on whey – now £885/t, up 86% on the year – which can be used as an SMP substitute.

As SMP markets becomes more profitable they could also start to attract milk that would usually be made into cheese, boosting that sector as well. And stronger world markets have led the EU Commission to sell off the vast majority of its butter stores for €2435/t – a 4% premium over intervention.

However, the Milk Development Council’s actual milk price index (AMPE), which tracks commodity values is now almost 20p/litre, well above the average price UK farmers are being paid for their milk.

Tom Hind, the NFU’s chief dairy adviser, said: “Some big questions need to be asked as to why farmers are no seeing the returns from these price hikes.”

Favourable market conditions

Deputy president Meurig Raymond said: “We must not forget those dairy farmers who are selling into cheese and other markets. Although they are unlikely to benefit from increasing returns to the liquid suppliers, we can all see quite clearly that market conditions are moving strongly in a favourable direction.

“Returns from milk protein sales, whey in particular, have been building progressively and are now at unprecedented levels.”

Cheddar producer Wyke Farms is one producer that will be paying farmers more. It has increased the price it pays for April milk by 0.5p/litre across its 145-strong south-west supplier base. This takes the family-owned business’s average producer price to 18.5p/litre.

Managing director Richard Clothier said the move reflected 42% growth in Wyke Farms business last year.

“We’re now the fourth-largest Cheddar brand in the UK, and the only independent brand in the top six. The price increase is part of a long-term strategy to add value to our branded cheese sales and to a sustainable price for our producers.”