Further evidence of a weakening market likely to impact on the UK

Milk prices have slipped again in Northern Ireland, providing further evidence of a weakening market that is likely to impact on the whole of the UK in the coming months.

The monthly auction of 83m litres by United Dairy Farmers – which controls the majority of milk in the province – saw buyers pay an average 22.39p/litre for one- and three-month contracts starting on 1 February.

This was slightly down on the 23.56p/litre they bid in December’s short-term auction, but massively down on the 29.58p/litre achieved November.

The result reflects the decline in a most key dairy commodity markets towards the end of 2007, as the EU moved more into line with the rest of the world.

For example, between November and December, skimmed milk powder values dropped by 6% to £2350/t, while butter slumped by 17% to £2100/t.

UK farmgate prices typically lag these movements due to the effects of longer term contracts, though the Northern Ireland results show the first signs of the downturn.

Ulster Farmers’ Union president Kenneth Sharkey said the outcome was “very disappointing” given the recent surge in feed, fuel and fertiliser costs.

“In our opinion, there are many good reasons why buyers should be more confident,” he said.

• Whole milk powder and Cheddar cheese prices were still 30% higher than 12 months ago.
  
• The value of the euro was at an all-time high against sterling, making UK exports more competitive.
  
• Retail prices for drinking milk remained strong.

These factors should be leading to stronger farmgate prices, said Mr Sharkey.