Milk production down, prices up

Friday, 27 October, 2000

By Robert Harris

Click here for latest milk price league table

SPOT milk prices hit 27ppl this week as liquid processors chased dwindling supplies, leading to hopes of further rises in ex-farm prices.

National milk output continues to fall, with provisional Intervention Board figures for the second week of October putting it at 14 million litres below quota.

“If this continues, we could see production fall another 60m litres this month, adding to the already big deficit,” says Scottish Milk chairman John Duncan.

Cold, wet weather across the country has played a part, but Mr Duncan suspects that the poor farmgate milk prices are the main cause.

“The national herd is shrinking and farmers are not able or prepared to add to feed costs to support production,” he says.

Reduced milk supplies and rising spot prices have already affected commodity production, and industry analysts report skim milk powder manufacture down by 19% in the first seven months of this year compared with the same period in 1999.

Likewise, butter and cheese make is down by 8-9%.

Now the liquid market is running short, too.

However, the high spot prices, up 4-5ppl on the month and 35% higher than a year ago, only represent about 5% of UK milk, says Mr Duncan.

But, although processors could not pay anything like 27ppl across the board, it does suggest that core milk prices should rise again in the spring, he adds.

“Buyers are going to be chasing milk. They will want to be assured of supplies.

“Dairy farmers would be delighted to offer that assurance, but at a price level that supports the business.”

quota link
Bruton Knowles

The severity of the downturn in milk prices is highlighted in our September table.

Seasonality has boosted the monthly value, but the rolling 12-month average highlights the prolonged slump.

The main change is a 0.3ppl price rise by Milk Link, triggered by reduced collection charges and a new volume bonus.

October figures will show some improvement as recent milk price increases feed through, though for many, the standard litre price will still be below production costs.

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