Farmgate milk prices stabilise as dairy markets improve
© GNP Renewed optimism in dairy markets has prompted several major milk processors to hold farmgate milk prices at current levels, following successive months of reductions.
Wholesale dairy values lifted for the fifth consecutive time at the latest Global Dairy Trade (GDT) auction on 3 March, rising to average US$4,301/t (£3,214/t).
Both the actual milk price equivalent (Ampe) and milk for cheese value equivalent (MCVE), used by industry as milk market indicators, also made gains during the past month.
See also: Red meat and dairy enjoy record year for exports
The Ampe rose by 2.7p/litre to 32.8p/litre in February, while the MCVE increased marginally to 32.7p/litre.
Brian Richardson, head of agriculture at Virgin Money, said: “We are encouraged to see that the prices milk processors are paying appear to be stabilising, albeit at a lower level.”
Mr Richardson said he recognised the long-term nature of the industry and the cyclical nature of milk prices, and that the bank would continue to work closely with its dairy farmers to support them.
Nick Holt-Martyn, principal consultant at The Dairy Group, added that European dairy markets appear to have lifted in February, with the exception of cheddar.
However, despite some recovery in dairy markets, large supplies of milk continue to create issues for the processing sector.
GB milk deliveries surpassed 35m litres/day in late February, 3.7% ahead of the same week last year, with volumes expected to climb further.
Mr Holt-Martyn said: “Each month that passes is a record level of production for that month since at least before milk quotas, if not ever, and it may be mid-late summer before that sequence is broken.”
He added: “The market stability doesn’t change the view that milk prices through 2026 are likely to be around 35p/litre, some 10p/litre to 15p/litre below the cost of production for all producers.
“To mitigate the losses the focus falls squarely on forage quantity and quality, cost-effective rationing and careful cost control.”
Organic markets
Organic milk prices have weathered the storm better than the conventional market with prices generally holding firm throughout, however organic milk supplies have also surged.
GB organic milk deliveries are currently tracking at 11% above the same volumes this time last year.
Farmers supplying Organic Herd have been encouraged to reduce the volume of milk coming off their farms in the coming months in order to help maintain its headline organic price.
Organic producers supplying Arla will continue to receive 57.98p/litre in March, although the outlook remains uncertain, with reports of weakening sales volumes.
Milk prices steady
Conventional dairy producers supplying Muller will continue to receive 34.5p/litre for a standard liquid litre in April, including the members advantage premium.
Barbers cheesemakers has also held its milk price into April, paying its producers 32.05p/litre for a standard manufacturing litre.
Arla will stand on at 33.98p/litre for a manufacturing litre in March, following six consecutive monthly price reductions.
Meanwhile, First Milk has increased its milk price by 0.5p/litre to 30.75p/litre for a manufacturing litre.
Mike Smith, farmer director and vice-chairman at First Milk, said: “Markets remain uncertain, and the outlook over the coming months is likely to be influenced by milk volumes during the spring flush.”
The numbers
32.8 The actual milk price equivalent in February (p/litre)
35m GB daily milk deliveries in late February
11% Increase in GB organic milk deliveries compared with same week last year