Further farmgate milk price rises are needed to instill producer confidence following a difficult year, said NFU Scotland milk policy manager George Jamieson.
In a briefing paper, distributed to members at the Royal Highland Show in Edinburgh this week, Mr Jamieson said morale was low and although farmgate milk price now averaged 31p/litre, these were “hard times for dairy farmers”.
“Desperately poor weather last summer, poor forage quality followed by a late spring, in conjunction with very high feed prices has resulted in low margins, difficult cashflow, and inevitably low profitability this year,” said Mr Jamieson.
Late first-cut silage – yields were down but quality was high – meant there were real concerns about forage stocks going forward, he added.
‘Prices should hit 34p/litre’
“Production in the UK is sluggish and will be down, even on last year’s record low, while competition for milk is strong.”
George Jamieson, NFU Scotland milk policy manager
Prices should be heading towards the 34p/litre mark, based on the Union’s own market-based pricing formula, he said.
The formula follows actual milk price equivalent (AMPE) (UK butter and powder wholesale prices) and milk for cheese price equivalent (MfCPE) (mild Cheddar and cheese by-products).
Global dairy values remained very strong, and the latest Fonterra forecast price was up 20% on last year, said Mr Jamieson.
“UK wholesale prices are robust, with no expectation that this will change dramatically,” he added. “Production in the UK is sluggish and will be down, even on last year’s record low, while competition for milk is strong.”
Cheese wholesale prices were moving up due to reduced production and Irish milk now being diverted to powder, said Mr Jamieson.
“With butter, cream and powder remaining strong, prices must rise in line with the market and to motivate production,” he said.
“With supply well down in Europe and no great expectations that USA or New Zealand will significantly increase production, then the omens remain good.”
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