Welcome 1.5p/litre September price rise for Muller suppliers

Müller farmer suppliers will get a 1.5p/litre increase from 1 September, taking the Müller Direct standard litre price to 29.5p/litre.

“The whole supply chain is currently under considerable pressure,” said Müller’s milk supply director Rob Hutchison.

See also: Drought likely to add 2p/litre to dairy costs of production

“On the demand side we have seen the value of bulk cream and butter decline, with exceptionally hot weather across Europe also contributing to subdued demand for liquid milk, affecting market returns. 

“However, farmers are suffering the effects of the dry, hot weather, with many already feeding the first cut of silage to cows. There’s uncertainty over how quickly fields will recover to provide grazing and whether there is enough winter feed. 

The AHDB confirmed that July was a quiet month for the wholesale dairy trade, with falling production failing to draw buyers back into the market.  

Continental Europe did not seem to be suffering as much as GB and Ireland, said AHDB Dairy, although this situation may change over the coming weeks.

Latest milk price moves

Muller is the first big buyer to report a September price rise.

The move follows a First Milk August rise of 0.8p/litre to 28p for a standard liquid litre (4% butterfat, 3.3% protein). This takesFirst Milk’s manufacturing standard litre (4.2% butterfat and 3.4% protein) price to 28.95p/litre.

Arla’s most recent price change was also for August, moving up by 0.88p/litre to 31.38p/litre for its standard manufacturing litre. The co-op’s standard liquid litre (4% butterfat and 3.3% protein) price rose by 0.85p/litre to 30.16p/litre.

Meadow Foods added 0.5p/litre from 1 August, taking the buyer’s standard A litre milk price to 28.50p.

Dairy markets in July

  • The cream market is tricky and did not benefit from the usual summer lift in demand, said the AHDB, with the July wholesale average at £2,150/t, a 7% drop on the month and 14% lower than in July 2017.
  • Butter trade was extremely thin through July, averaging £4,880/t, down 5% on June and 10% lower than a year earlier.
  • Skimmed milk powder prices weakened slightly in July on lack of demand and increased supply, averaging £1,340/t, a 1% drop on the month and 15% down on year earlier levels.
  • Cheddar provided one of the few bright spots, with low stocks and, despite relatively quiet trade, the average price at £3,050/t was up 2% on that for June.

Expert analysis by Peter Meehan, INTL FCStone

Volatility continues to be our word of the week, with European spot skim milk powder (SMP) down 2% on the week to £1,316/t, while spot butter was also lower.

SMP and butter have continued to trend lower, with SMP down by 7% over the past five weeks and butter down 11% in the past seven weeks to £4,875/t.

Dairy futures prices have seen a bit more support over the past week, with SMP’s August-December futures’ contracts gaining more than 4% on average since 18 July.

End-user purchasing stemming from concerns over supply due to the current European weather situation, along with a reduction in the volume of SMP sold out of intervention by the EU Commission in its latest tender, seem to have made buyers somewhat nervous, leading to this latest round of buying.

On the flip side, however, NZ powder exports were weaker in June compared with last year, with whole milk powder (WMP) and SMP exports both down by more than 30%.

Exports of SMP and WMP to China were down 55% and 31%, respectively. NZ fat exports, meanwhile, remained relatively strong, with butter exports up 9% on last year and AMF exports up 27%.

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