The farmgate milk price is expected to rise over the next three months, according to figures released by AHDB Dairy.
The levy board said the predicted increases were based on improved prices for skim-milk powder (SMP) and cheese on wholesale markets.
While rises in product prices slowed in June, the overall market value for milk increased. This was mostly due to firm cheese markets, and a continued shortage of fresh SMP, AHDB Dairy’s latest market intelligence report said.
However, the price rises for these commodities are small and the increases in farmgate milk prices are predicted to be lower than in previous months.
The projected increase is calculated through establishing a milk market value (MMV) that is in turn based on the actual milk price equivalent (AMPE) and a milk for cheese value equivalent (MCVE).
With increases for both AMPE – up month on month by 0.4% for June to 33.2p/litre – and MCVE which rose by 1.4% to 32.77p/litre, the resulting MMV increased by 0.4p/litre between May and June.
A move in the MMV is linked strongly to a change in price three months later and, historically, it has been found that a 1p/litre change in the value will lead to about a 0.6p/litre change.
Therefore, with a 0.4p/litre change in June’s MMV the AHDB is suggesting the GB average milk price will rise by about 0.2p/litre by September.
Recent price announcements reflect this, with many buyers increasing milk prices through the summer months on the back of the rising value of milk through the spring, said the AHDB.
However, it stressed figures provided an indication of the direction and size of expected milk price movements not a precise change to be implemented by buyers.