MM waits for green revaluation

10 January 1997

MM waits for green revaluation

MILK Marque has delayed its round of selling to the trade until after Jan 21 – when the next green £ revaluation is expected.

With just one week to go in the current monitoring period, the green £ gap has now extended to 9%. At this level, a revaluation of about 4.5% will be needed, knocking an equivalent sum off support prices.

"It has been our practice to publish prices for our January selling process at about this time," said Milk Marque chief executive, David Yoemans. "But customers have told us that the impact of a revaluation in the middle of a selling round would cause great uncertainty and may result in published prices being inappropriate. In these exceptional circumstances, we will, therefore, delay publishing round-one prices."

The move has been welcomed by the Dairy Industry Federation as a "sensible precaution". Trade sources suggest a revaluation of this order would take £100 off butter intervention prices, to about £2290/t, and £70 off skimmed milk powder, to about £1595/t. This is equivalent to 1p/litre in terms of liquid milk.

The next selling round, for deliveries from April, will also be the first under the new rules imposed by the Office of Fair Trading last summer.

Second bidding round

Under these conditions, Milk Marque will be obliged to open a second round of bidding at lower prices if it sells less than 90% of its milk. (The co-op is offering bet-ween 13m and 14m litres a day on six, 12 and 18-month contracts.)

There is a widespread expectation that the trade will hold back on its bids, so forcing another selling round, as it did last summer. "It will not be easy for Milk Marque to persuade buyers to commit themselves from April on a currency-led falling market," said industry consultant, Mike Bessey.

The OFT rules do include a floor price – the Intervention Milk Price Equivalent – below which Milk Marques rates are not allowed to fall. Last summer this stood at 24.2p/litre. But a green £ revaluation in November, and another one to come, will take this down to about 22.5p/litre.

Milk Marque had "no comment" on what its prices were likely to be. But the likelihood is that market realisations will be lower from April, which does not bode well for producer prices later in the year.

lMilk Marques production forecasts, issued in a letter to the trade last Monday (Jan 6), reveal a further shrinkage in its milk pool. Availability for the 12 months to Mar 1998 is put at 6.5bn litres, compared with 7.3bn litres forecast for the year ended Mar 1997, and 6.8bn litres for the year to Sept 1997. &#42

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