Milk prices go sour – FWi REVIEW OF 1997


Compiled by FWi staff

THIS was the year of unprecedented cuts in
milk prices. By December, producers were receiving 5ppl less than they
were paid one year before. In theory, the cost of leasing quota should
have fallen by a similar amount to offset the reduction. But prices
remained high and dairy farmers had to tighten their belts.


  • Genus claims UK dairy
    farmers are tied down by high quota costs which are a straight-jacket on
    the industry. “Deregulation was designed to create a more market-led
    environment, but instead it has held back those producers wishing to
    expand,” says product manager, Mark Woodall.


  • Pressure mounts on
    milk prices after Milk Marque receives bids for just 75% of the daily
    14m litres it offers to the trade. The company is obliged to launch a
    second selling round at lower prices. Milk Marques average price will
    fall from 25.9ppl to just 23.8ppl, warns industry consultant Mike
    Bessey. Prices paid to non-MM members are likely to follow the downward
    drift, he says.

  • Brokers claim that clean quota prices will rise
    as producers cover their excess production following a bungled
    announcement by the Intervention Board. IB officials put out the January
    production figures showing the UK was over quota, only to revise them
    two days later showing a continuing deficit.


  • Dairy companies begin pruning the price for direct supplies,
    after Milk Marque sees its rates to the trade drop by 2ppl in early
    March. Dairy Crest takes almost 3p off its standard litre from 25.68ppl
    to 22.70ppl. Other buyers also announce cuts. Northern Milk Partnership
    reduces prices by 1.9p to 22.80ppl.

  • Unigate announces a
    “provisional” cut of 1.75ppl and says it will maintain its “Milk Marque
    Plus” premium of 0.8ppl until November.

  • Milk producers claim
    the size of the reduction is way in excess of that justified by recent
    Green Pound reductions.

  • Milk super-levy looks increasingly
    likely after figures show February production to be 5% over-quota.
    Cumulative output is now 20m over target.


  • Milk Marque announces
    a 2.5ppl milk-price cut. Farmers question the need for prices to fall at
    a time when EU butter and skimmed powder markets have been improving.
    But Sterlings strength has prevented UK traders from cashing in on the
    EU commodity market, counters a Milk Marque spokesman.

  • Quota
    leasing prices kick off the new season in April at 9.5ppl. But as more
    cows are moved under the cull and milk price cuts begin to bite, 9ppl
    will become the norm, say agents.


  • Estimates of the UK
    super-levy for 1996/7 are raised. Revisions to the Intervention Boards
    milk production estimate for March give an extra 7.8m litres after
    adjusting for butterfat. As such, the provisional super-levy increases
    from £16.5m to £18.6m.


  • EU farm commissioner,
    Franz Fischler, boosts the prospects for milk quotas when he rejects the
    need for “radical reform” in the dairy sector.

  • Severe
    seasonality penalties start hitting milk producers, and prices fall into
    the “high teens.” Five companies, headed by Milk Marque, take 3ppl off
    their June milk cheques in an attempt to achieve a more level supply
    profile. Milk Marque members receive just 18ppl for a standard litre of


  • Milk Marque announces
    its prices to the trade for supplies from 1 October, with quotes between
    1.7 and 2.3ppl lower than those currently being paid. The falls will
    almost certainly lead to smaller milk cheques in the autumn as the co-op
    passes on lower returns to its members.

  • Milk Marques market
    share slips to 46% as members turn to other buyers or go bust. Lastest
    figures show the companys milk sales were 6% down in 1996.


  • MD Foods becomes the
    first major dairy company to tell its suppliers to expect a 1.5ppl
    price-cut in the autumn.


  • Milk Marque
    confirms it is knocking another 2p off milk prices this autumn, taking
    its standard price to just 20ppl. The drop takes the total fall during
    the year to 4.5ppl. The company blames the strength of Sterling which
    has forced down support prices by 20%. Other milk buyers are thought
    likely to follow the 2p price reduction.

  • Dairy producers face a
    significant downturn in profits as milk price reductions begin to bite.
    Tom Kelly, director of consultants Axient, says profits on many farms
    could fall by as much as 65%. Nestle joins other companies in announcing
    a 2ppl milk-price cut.


  • The collapse in
    dairy farmer incomes continues, with three of the countrys largest
    processors announcing price drops. Unigate issues a new standard litre
    price of 20.3ppl with effect from November 1.

  • Octobers milk
    cheques for September are the last before severe cuts begin to bite.
    Lower prices will inevitably lead to lower profits, warn consultants.


  • Quotas
    should be scrapped and support prices cut by 30% so farmers can compete
    on the world market, claims Peter Nash, MAFFs head of milk.

  • Dairy farmers should not expect to see any improvements in milk prices
    during 1998, warns Alan Wiseman, chairman of Robert Wiseman Dairies.

  • Milk cheques arrive showing year-on-year deductions of 5ppl.

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