UK dairy industry awaits Tesco milk price move

Milk producers and processors are waiting keenly for Tesco to reveal its new milk price for the 850 or so members of its Sustainable Development Group.

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These producers supply its liquid milk needs through Arla Foods and Wiseman Dairies.

It is understood that the price from 1 April has been agreed and letters are being sent to group members this weekend.

These will reveal what has happened to the “cost tracker”, based on Promar’s forecast average cost of production, which sets the base for the Tesco price. Expectations are that this will be down by between 1p/litre and 1.5p/litre, reflecting lower predicted input costs.

Currently Tesco pays a 0.25p/litre market adjustment above this base price, with a further 0.5p/litre for producers who are signed up to Promar’s Farm Business Accounts.

Industry observers say that, if the total price fall is limited to 1p/litre, that will be a decent result. But even a 2p/litre cut would leave Tesco suppliers near the top of the milk price league table, given the cuts that have already been imposed by other buyers this year.

Meanwhile, milk prices in Northern Ireland appear to have bottomed out, with United Dairy Farmers achieving a 1.1p/litre increase in its monthly auction.

The company sold a total of 45m litres for April delivery at 18.83p/litre, with the increase reflecting the slight improvement in butter and skimmed milk powder markets following the introduction of intervention by Brussels earlier this month.

Ulster Farmers’ Union president Graham Furey said it was a relief to see average milk prices edge upwards, but farmgate prices were still well below the cost of production.

Recent figures show the average Northern Ireland milk producer received just 17.64p/litre in January, somewhat blow the current Intervention Milk Price Equivalent, which has increased to 19.9p/litre on the back of currency movements, and far below the 26.85p/litre price in GB.

“We accept that the global dairy market is very difficult, but retail product prices remain stable,” said Mr Furey. “About 20% of the milk processed in Northern Ireland is going into the liquid market, and one quarter of the milk processed here goes into cheese; we are not just a milk powder dependent region.

“With very favourable currency conditions, dairy farmers continue to question why better prices are not being generated.”