First Milk edges price down and warns of future uncertainty

British dairy co-op First Milk dropped its February liquid milk price by 0.25p/litre following downward pressure on cheese markets at the end of 2018.

The drop means the co-op’s 900 farmer-owners will receive 27.5p/litre for litres with a constituent content of 4% butterfat and 3.3% protein.

Producers on manufacturing litres of 4.2% butterfat, 3.4% protein will receive 28.34p/litre from next month.

See also: How dairy farm is controlling Johne’s while buying-in cows

First Milk has reduced prices for its producers in consecutive months in 2019, dropping by 0.75p/litre in January .

The reduction was because of the effect of downward pressure in the markets during the latter part of last year, according to First Milk vice-chairman and farmer director Jim Baird. He added that the pressure had taken longer to influence cheese markets than some other dairy commodities.

“It is that lag that has resulted in this milk price reduction for February,” said Mr Baird.

“Hearteningly, dairy markets have recovered in recent weeks, and there are signs of more stability ahead.”

However, the vice-chairman added that uncertainties over Brexit clouded the future market direction, making it too early to predict what will happen with milk prices.

“We remain focused on delivering as much stability as we can – something reflected in the scale and timing of our recent milk prices movements,” he added.

Average UK wholesale commodity prices did slip back in December, according to AHDB Dairy.

Bulk cream and butter prices dropped in December by 7% and 1.9% to average £1,700/t and £3,680/t, respectively.

Skim milk powder (SMP), bolstered by another substantial sale of powder out of EU intervention stocks, continued its recent revival.

Average wholesale UK SMP prices increased by 5.6% to £1,500/t – the commodity’s highest level since September 2017.

More positive signs from the GDT auction

The Global Dairy Trade auction index, an indicator of global dairy market sentiment, also continued its rejuvenation following six months of negative results.

Tuesday (15 January) saw a 4.2% increase in the average wholesale price to $3,057/t (£2,376/t).

Buoyed by the now-dwindling EU intervention stocks of just 22,000t, SMP again leapt by 10.3% to average $2,405 (£1,870/t), while whole milk powder, the auction’s most traded commodity, also increased by 3% to $2,777/t (£2,159/t).

The auction index has now recovered more than half of the losses sustained between May and December last year, when it lost 20% of its total value following 13 successive price drops

Futures markets and commodity risk management online course:

  • Risk management strategies for a more predictable financial performance
  • Educated conversations when collaborating with your advisors
  • Negotiate better prices with your grain merchants

View course