Arla holds farmgate milk price for February in tight market

Arla’s on-account price for conventional and organic milk from 1 February will stay at 37.58p/litre for a standard manufacturing litre and 45.03p/litre for organic milk.

The manufacturing price is based on collection every other day of top quality band milk, with a minimum annual production of 1m litres at 4.2% butterfat and 3.4% protein.

Other buyers that have declared prices for February are in a range from 33p/litre to 34.5p/litre before seasonality.

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With buyers chasing tight supply, spot milk prices continue firm at anything from 45p/litre to 50p/litre delivered, depending on haulage distances (based on data).

European commodity prices for cheese and powder continued their strong development in December, while butter markets stabilised, said Arla Foods amba board director and farmer Arthur Fearnall.

“While this month [February] is a hold for our milk price, a positive outlook will be welcomed by our farmer owners,” he said. “The value of producing milk is increasing like never before and our farmers are continuing to experience significant inflation.

“This is impacting not only short-term operations, but also longer term costs which are challenging the viability and investments needed to stay at the forefront of sustainable farming.”

Tight supply outlook

The milk production outlook remains subdued despite strong farmgate prices, according to AHDB Dairy, with the latest forecast for global production in 2022 suggesting 0.6% annual growth in milk supply, equivalent to an additional 1.8bn litres of milk. 

This follows a low growth year in 2021, when estimated world milk production rose 0.9% for the year.

Lead dairy analyst Patty Clayton said high input costs, labour shortages and increasing greening requirements were offsetting the impact of current strong milk prices, and with no relief in sight on cost inflation, at least for the first half of this year, there was little incentive for farmers to drive for higher milk yields.

“Favourable weather through the spring peaks could bump up supplies slightly, but the overall outlook for feed, fertiliser and energy costs remains bullish, limiting any significant supply response in the short to medium term,” she said.

Other factors, such as labour availability, shipping delays and environmental requirements, would continue to play a part in how much production growth took place, although their impacts would be longer term and were less clear, Mrs Clayton said.

Potential for further increases

“The limited increase in milk supplies will continue to support current price levels, with some potential for further increases as demand continues to recover to its pre-pandemic levels. 

“There are, however, some risks of softer demand from further Covid outbreaks or reduced purchasing as buyers use up some of the security stocks held in response to delivery delays.”

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