Arla freezes February milk price on positive market outlook

Arla, the UK’s largest dairy processor, has held its February milk price on the back of positive commodity prices and falling European milk production.

Arla’s 2,400 non-aligned producers will receive 30.24p/litre for manufacturing litres with a constituent content of 4.2% butterfat and 3.4% protein.

Farmers paid on liquid milk contracts of 4% butterfat, 3.3% protein will continue to receive 29.06p/litre from the beginning of next month.

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The effect of last summer’s drought on European milk production had been felt at the end of 2018, as it fell behind year-earlier levels, according to Arla Foods amba board director Johnnie Russell.

“This has resulted in the commodity markets performing better than expected with butter prices remaining stable, SMP prices firming and cheese prices starting to improve, said Mr Russell, adding that these factors had facilitated the price hold when many other processors had dropped farmer-returns.

Expert market analysis by Peter Meehan, senior commodity analyst at INTL FCStone

Skimmed milk powder (SMP) markets continued their march upwards over the past few weeks, with European and New Zealand SMP all posting big gains.

The EU Commission’s first Intervention tender of 2019 saw more than 80,000 tonnes of SMP sold out of the scheme. This now leaves just over 22,000 tonnes remaining in Intervention stores.

Global SMP markets have responded with the European SMP quotation recording its 12th increase in 13 weeks, moving to its highest level since July 2017.

In New Zealand, the latest Global Dairy Trade (GDT) auction saw its fourth consecutive increase as the overall index gained by 4.2%.

SMP lent its support to the GDT index as it rose by 10% at this latest auction, climbing to its highest level since February 2017.

The increase comes about despite strong milk production coming out of New Zealand in December, with collections up 4.4% on 2017.

European milk production

The latest milk production numbers from Europe, meanwhile, were somewhat mixed.

UK milk collections in November continued to recover, up 0.6% on 2017 while Ireland saw collections increase by over 20%.

German and French collections struggled again in November, down 1.3% and 3.7% respectively. Dutch production in December, meanwhile, was down 6.3%.