Retail milk prices fall despite buoyant commodity market

Retail milk prices have dropped by an average of 5p/litre over the past year, with discounters continuing to gain market share. But buoyant global commodity markets mean milk buyers must increase farmgate prices to remain competitive.

According to analyst Kantar Worldpanel, discount stores sold milk at 17p/litre below the retail market average in the 52 weeks to 10 July. Despite this, Marks & Spencer recently pledged a 2.31p/litre increase for its 42 dedicated farmer suppliers, and Robert Wiseman Dairies has hinted at further price rises on liquid contracts in the autumn.

“For commodity based prices, UK processors still have some catching up to do,” said a report by DairyCo. Even though UK commodity markets have fallen from their peak, farmgate values are still woefully out of line with market returns, with the Average Milk Price Equivalent pegged at 35.2p/litre in June.

“With the prospect of forage scarcity and farm input prices remaining high, and steadily increasing demand in the liquid milk market, competition for milk supplies may continue for the rest of 2011/12,” said DairyCo.