Buoyant wholesale dairy markets keep milk prices firm
© Tim Scrivener Dairy farmers can expect some more stability this summer with several major milk processors committing to hold farmgate milk prices into July and August.
Milk prices have remained stable since the beginning of the year, despite a huge surge in milk production throughout May and June.
Strong demand at wholesale has helped to maintain current levels, with butter trading at £6,160/t in June, an increase of £500/t compared with last year, while mild cheddar rose by £230/t to £3,900/t.
Retail demand has been mixed throughout the past year with strong demand for cheese, butter and yoghurts, but reduced liquid milk sales.
Total retail sales volumes of dairy products were down marginally for the 52 weeks ending 14 June; however average values were up by 3.5%, according to data from Neilson IQ.
Emma Wantling, retail and consumer insight manager at the AHDB, said:
“Semi-skimmed cow’s milk, which represents 58.3% of all cow’s milk volumes, saw a 4% decline in volumes, while whole milk continued to see volume growth of 2% due to an increase in shopper numbers.”
She added that cheese volumes sold at retail were up 2.9% year-on-year, with total spend up by 3%.
“Cheddar, which represents 41.6% of all cow cheese volumes, saw a 3.9% increase in volumes.”
Global dairy markets started the year fairly strong; however, wholesale values at the fortnightly Global Dairy Trade (GDT) auctions have been in decline since mid-May.
The GDT price index fell by 4.1% to average $4,274/t (£3,118), with prices down for butter, skimmed milk powder and whole milk powder.
Mandatory dairy contracts
The Fair Dealings Obligations (Milk) Regulations apply to all dairy contracts from 9 July.
These regulations are intended to make contracts between producer and processors fairer and clearer.
NFU Dairy Board chairman Paul Tompkins said: “It is disappointing to see a flurry of late contracts so close to the new regulations deadline, after a transition period of nearly 15 months.
“That being said, we are seeing compliant contracts offered to farmers across the country, which is a great step forward towards a fairer, more transparent supply chain.”
Milk price holds
Arla, Muller, First Milk, and Barbers have all committed to further price holds.
Conventional producers in the UK supplying Arla will receive 47.87p/litre in July, after taking into account a quarterly currency exchange rate adjustment of 0.15p/litre.
Meanwhile, organic producers will be paid 57.86p/litre.
The processor says that the current market outlook remains firm, with commodity prices increasing.
Arla also notes that retail sales have been growing, but at a slower rate, while global supplies appear to be increasing.
Muller has confirmed it will stand on at 42.25p/litre in August for a liquid litre, including its quarterly advantage premium.
It also recently announced it is looking to revitalise its organic milk pool, which is currently paying 56.75p/litre.
Richard Collins, head of agriculture at Muller, said organic production had dropped in recent years, but organic demand remained strong.
Dairy co-operative First Milk has held its milk price at 44.85p/litre in August for a standard manufacturing litre, including its member premium.
Meanwhile, Barbers Cheesemakers will retain its manufacturing milk price at 45.08p/litre.