First Milk and Crediton push farmgate prices over 40p mark
© Tim Scrivener Dairy processors First Milk and Crediton have announced May milk price rises, breaking the 40p threshold.
First Milk has confirmed an additional 2.9p/litre increase for May 2022, on top of the previously announced 1p/litre rise for the month.
This puts its manufacturing standard litre at 40.05p/litre, inclusive of the members’ premium and regenerative farming bonus.
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Robert Craig, farmer director and vice-chairman at First Milk, said: “Exceptional cost inflation continues to be felt on farm and we are working hard to return additional income to our members as fast as we can.
“There is a growing need to see an enduring step-change in dairy prices that recognises the true value of milk, and we will continue to do all we can to deliver this.”
Crediton
Crediton Dairy is adding 3.5p/litre to its producer milk price from May.
This will bring its standard liquid price up to 40.25p/litre, based on milkprices.com’s standard liquid litre of 4% butterfat and 3.3% protein.
This standard litre price is inclusive of the processor’s monthly farm metric bonus of 0.5p/litre.
Milk prices paid by Crediton in May will be 10.75p/litre higher than the same month last year.
Feed cost pressure
Analysis by Kite Consulting shows that processors will need to pay closer to 50p/litre if they wish to reverse the drop in milk volumes.
A milk-to-feed price ratio of 1.2:1 is usually required to encourage farmers to feed more and in turn increase milk output, according to the consultancy group. As feed costs rise above £300/t, milk prices need to be about 46-48p/litre to encourage increased output.
John Allen, Kite’s managing partner, said history also shows that in exceptional times a ratio of 1.3:1 is required to turn volumes around and for that to happen the milk price needs to be more than 50p/litre.
“Aside from feed, fertiliser prices and availability, this grazing season will also be a key factor, as it is likely that farmers will cut back on fertiliser use, despite the false economy of doing so. This will potentially mean that forage quantity and quality will be compromised for the winter as big bulky forage cuts will do little to stimulate milk volumes,” said Mr Allen.
“Lower forage volumes and higher feed prices will mean farmers will almost certainly reduce their cow numbers – especially as cull cow prices are generally high.
“To put the fertiliser price in context between January 2010 and July 2021, prior to the surge in cost inflation, it took an average of 1,000 litres to pay for a tonne of fertiliser. Between August 2021 and February 2022, it took 1,800 litres to pay for a tonne and currently it is more than 2,000 litres.”