Stronger sterling will impact dairy market values

Strengthening sterling against the euro is set to have a significant impact on dairy commodity prices in coming years, according to Nick Holt-Martyn at The Dairy Group.

With the Bank of England discussing increasing interest rates to between 2% and 5% over the next decade, at a time when eurozone rates have dropped again, from 0.25% to 0.15%, the pound has grown increasingly strong.

See also: More prices and trends

“Currency exchange rates directly impact the competitiveness of EU commodities on the UK market,” said Mr Holt-Martyn.

British exports would become less competitive, while cheaper imports would undermine the value of UK products.

Despite weaker EU demand, domestic wholesale prices recovered somewhat in June as the seasonal reduction in UK milk production renewed buying interest, said a report by DairyCo.

“Cream prices picked up strongly due to the soft fruit season, and there appears to be little surplus cream available.”

Butter, cheese and milk powder values also improved on the month, resulting in a 1p/litre increase in the Actual Milk Price Equivalent, to 32.3p/litre.