April milk prices may not last
April milk prices may not last
By Robert Harris
ALMOST 8000 dairy producers belonging to three of the UKs leading farmer-owned milk brokering businesses have finally been told how much they will be paid for April milk, ending weeks of uncertainty.
But, while it is hoped the new prices will hold, the poor state of the market means that companies will continue to review them.
Zenith members received letters this week announcing a cut of almost 3p/litre, taking the value of a farmers weekly standard litre (4.1% butterfat, 3.3% protein, top hygiene bands, 1101 litres/day) to about 15.5p/litre (16p/litre for every-other-day collection).
The Milk Group, which is due to merge with Zenith to form Dairy Farmers of Britain this summer, has also dropped prices to "similar levels".
Both companies sold their milk jointly. "We have pitched the price at a level we believe we can maintain for the next three months," said Zenith managing director Chris Bird. "But we have announced it as an April price, and we will review it monthly."
Weak commodity prices and a flood of spring milk undermined the market, he said. "There was a lot of competition for premium-service contracts. While we maintained the majority of ours, their value has been eroded."
Tough summer
Mr Bird admitted there would be considerable concern among members at these new prices. "They are totally unsustainable. We have plans to rationalise our business and invest in the processing sector, and we hope our members see this as an opportunity. But it is going to be a tough summer."
First Milk has been operating a two-tier pricing structure since it was formed from the merger of Axis and Scottish Milk. This structure has now disappeared.
All members will receive just over 15.8p for our standard litre backdated to April 1. Thats a fall of 1.2-1.7p/litre, depending on area and collection frequency.
However, members on daily collection who are in an every-other-day collection area will be deducted 0.2p/litre if they are asked to change to EODC but decline to do so.
The company says daily farm production is running at about 750,000 litres above the level seen this time last year. "Obviously, we cant put all that into contracts," said First Milks Jonathan Horrell.
Some is being traded into Ireland for processing, which First Milk says is still returning a better price than beleaguered secondary markets, where values have dropped as low as 8-10p/litre. "I have heard that price being traded for some of the very last marginal milk," said Mr Horrell.
All major co-ops are now in a tight band, with Milk Link marginally ahead on its recently announced standard litre price of 15.84p/litre (16.44p/litre for EODC). This means direct suppliers to the four major processors have maintained a 2-2.5p/litre premium over the co-ops for this spring at least.
• Suppliers of drinking milk to Irelands number one buyer, Glanbia, picketed the companys depots this week in protest at the 1.9 cents/litre (7p/gal) price cut for this months supplies.
The company says that, with large volumes of cheap milk coming in from the UK and with other processors using manufacturing milk contracts to supply the liquid market, it has to drop prices to stay competitive.
But Donal Kelleher, Irish Farmers Association liquid milk chairman, says the cuts will take returns back to pre-1989 levels, while consumers are now paying 23% more than they did then.
Around 500 suppliers met in Dublin on Tuesday night and further meetings were planned with Glanbia to seek a better deal. *