Milk price rises welcome but soaring costs eclipse improvements

Two milk buyers have increased their prices this week, fuelling hopes that further price increases could be in the pipeline.

Milk Link announced it would increase members’ manufacturing prices by 1p/litre from February, and liquid values by 0.78p/litre. That would take both prices to 26p/litre, ahead of all other processors’ non-aligned prices.

Tesco has also revealed a price rise for its direct suppliers, following an interim price review by its Sustainable Dairy Group. Farmers’ costs of production had increased by 0.32p/litre since October, and it would match that increase from February, it said. That would take its standard price to 28p/litre, or 28.5p/litre for producers who are signed up to Promar costings.

However, soaring feed wheat and fertiliser prices were unlikely to abate in the medium term, said a report by DairyCo. “According to Kite Consulting, costs have increased by 1.5-2p/litre through the winter.” Rising feed, fertiliser and fuel prices could add a further 4-5p/litre to that. “Unless there are rapid increases to farmgate prices UK production may fall back over the next year.”

market report