Market report: Farmgate prices trail despite recent rises

Milk prices increased by an average of 0.38p/litre in August compared to the month before, but strong commodity market returns continued to leave farmgate prices trailing.

Farm prices averaged 24.68p/litre in August – 2.94p/litre below the wholesale market price equivalent, according to Nick Holt-Martyn, director of The Dairy Group. While improving commodity makets had boosted average wholesale prices by 1.2p/litre since March, farm prices had only risen by 0.55p/litre over the same period.

Although liquid values were under pressure due to retailer discounting – cutting prices by 29% over the past year – whey, skimmed milk powder and cream values had improved. “With rises now in the wider commodity market, UK prices should be moving up to close the gap with market returns.”

Dairy farmers also faced a 25% increase in the cost of purchased feed this winter, adding 1.5p/litre to the cost of milk production. But retailers showed little sign of increasing returns. “All the indicators point to rising milk prices across the board, but precious little is on the horizon,” Mr Holt-Martyn said.