Row over Defra’s farmgate milk price ‘rise’

A row has blown up over Defra’s announcement of a 2.57p/litre farmgate milk price increase in February.

The ‘rise’ to 25.57p/litre came about mainly because Defra chose to load the whole of Arla’s 2015 annual bonus, worth 0.78p for every litre produced by its members, on to the February 2016 price calculation.  

In fact most producers saw a price drop for the milk they delivered in February, leading milk producer and industry figures to call on Defra to revise its calculation, which is seen as unrepresentative, unfair and unhelpful.

Independent dairy analyst Chris Walkland branded the figures absurd. “The figures cannot be allowed to stand – they don’t reflect reality and they are giving the wrong message to consumers.

See also: Muller farmers could lose 1.75p/litre in Scottish dairy closure

“At 25.5p per litre, this industry does not have a problem. Yes, farmers would be losing money but it would not be in the crisis it is in.” 

NFU chief dairy adviser Siân Davies said that the figure was completely misleading, even though statistically it might be right as Arla members received that money with February’s milk payment in mid-March.

“There was no price increase announced by any UK milk buyer,” she said. “What they need to caveat it with is the huge range of prices from 15p/litre to over 30p/litre – the variance has never been greater – that’s what Defra needs to look at.

“If that’s the figure going to the EU, it’s not representative of the UK.”

Milk production had slowed but buyers were still using the threat of the spring flush to pressure farmgate prices.

Defra says that its price surveys cover 90% of milk bought by dairies. It is required to collect UK farmgate milk prices and report these to the EU Commission.  

The UK price is a weighted average, collected from price information from all dairies buying more than 2m litres of milk a year in England and Wales. Devolved bodies report pricing on the same basis for Scotland, Wales and Northern Ireland.

In publishing the February farmgate price report, Defra commented that it was inflated by bonus payments made on annual production.

AHDB Dairy calculated that had it not been for the inclusion of the Arla 13th payment, the February calculation would have brought a drop on January’s price.

“Arla’s 13th payment was one of the main bonuses attributed to February’s milk payments in Defra’s calculation, although it actually applied to all volumes delivered in 2015,” said the levy body.

“AHDB estimates this has inflated Defra’s figure for February by between 2.50 to 2.75p/litre. This would put the price, excluding retrospective bonuses, slightly below January’s figure of 23.09p/litre, which is in line with how monthly prices have moved on the AHDB Dairy League Table.”

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