Milk prices should start to increase this winter, following sharp rises in butter and cream values, according to The Dairy Group.
Better commodity prices boosted the Actual Milk Price Equivalent by 14.8% between September and October, to 26.4p/litre, while the rolling Milk Price Equivalent, which accounts for 90% of the UK market, also rose sharply.
Although intervention stock would continue to weigh on the market, actual returns were back to 2007 levels and processors should be increasing payments, said Nick Holt-Martyn, director of The Dairy Group.
“With both Wiseman and Dairy Crest expected to announce strong half year figures this month, the lack of milk price rises this autumn will anger many milk producers. Although most of the rise is in butterfat instead of protein, the failure to pass on wholesale commodity rises in cream and butter will be disappointing.”
By not passing these improvements back to farmers so far, the processing sector ran the risk of EU investigation into the lack of market dynamics, while also discouraging dairy farmers from investing for the future, he added.