World supplies will dictate farmgate milk prices

UK milk prices appear to have reached their peak, with the spring flush under way and global commodity markets under pressure.
Although the first price cut from Tesco was due to lower production costs, international market weakness would start to filter through later in the year, warned Nick Holt-Martyn at The Dairy Group. “The decline in market returns has yet to impact at the farm gate, with Milk Link holding their price until May at least. If the co-ops can deliver strong pricing the rest of the market will be forced to keep up.”
But costs of production were still high, meaning any drop in price would impact on profitability. “There is very little leeway for prices to drop from their current rolling 27.8p/litre before there will be a serious impact on production across the EU.”
Future market trends would depend on global milk supplies, which were running well ahead of last year. While the warm dry weather would lead to an earlier and possibly higher peak, drought would slash summer supplies. “The weather could be a key factor in how the market develops,” he said.
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