World dairy prices hit fresh six-year low

World dairy prices slumped to a fresh six-year low this week, after UK dairy companies cut payments to farmers once again.

The average price on the Global Dairy Trade auction fell 5.9% to US$2,276/t (£1,457) on Wednesday (1 July) – the eighth drop running.

Returns at the fortnightly sale are down 55% on February 2014’s all-time high and have reached their lowest point since July 2009.

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Supplies this week were 38% higher than mid-June, with 33,200t sold, and all but one product recorded losses.

Skim milk powder prices dropped 5.8% to $1,875/t (£1,200) and whole milk powder was down 10.8% to $2,054/t (£1,315).

The Dairy Group principal consultant Nick Holt-Martyn said the problems facing the sector were clear, but solutions were not.

“There will need to be an end to supply growth before markets can hope to recover and even then it will need to be coupled with improved demand,” he said.

“Hopefully, despite dairy products’ inelasticity, low prices might stimulate some increase in demand on the back of an improving world economy.”

Latest EU figures show milk production across the continent is below last year’s levels, but still running high.

German milk deliveries in April were 1.4% down on the year, while France was back 1% and Denmark was 0.2% lower.

Ireland was leading the pack with an 11.3% year-on-year increase, Poland was up 4.2% and the Netherlands produced 1.7% more milk.

UK production figures will be revised downwards 630,000 litres/day from April onwards, due to central Defra officials taking over the job from the RPA.

But British output in this current milk year will still be 1.1% higher than in 2014-15.

Mr Holt-Martyn added that UK shoppers were benefiting from lower prices.

He said the 12.3% cut in the retail cost of four pints since last year broadly matched the 25% fall in farmgate prices.

“It is highly unlikely that the milk processors are benefiting from low milk prices any more than the retailers,” Mr Holt-Martyn said.

“The dairy industry is collectively damaged by low prices, which makes the hubris and complacency of the EU Commission and national governments so disappointing.’

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