Signs of an end to the milk price slide

By FWi staff

MILK producers have remained under pressure during the past 12 months, with farm-gate prices falling a further 1.5p to average 20.2ppl last month.

However, there are at last signs of a bottoming out, with the first improvement in almost three years announced by Milk Marque in November – its new monthly bonus paid producers an extra 0.4ppl.

This was partly due to its stance in the August selling round, when it scrapped the 90% minimum selling rule, and accepted fewer bids at a higher price. It then sold much of the remaining milk for the same value.

Two Green Pound devaluations in October have also boosted confidence, raising the intervention milk price equivalent floor by about 0.3ppl.

Is that confidence well-founded? Recent spot prices of 27ppl might suggest so, but this is due to the current milk shortage, which is unlikely to last.

Milk production has fallen, and is heading for its fourth month below quota. And Milk Marque continues to ship volumes of milk to Northern Ireland and Ireland for butter/skimmed milk powder manufacture, reducing availability on the mainland.

Meanwhile, demand has risen as processors gear up for the Christmas rush, which traditionally sees demand for cream and doorstep deliveries double.

However, much excess “disposal” milk for butter/SMP manufacture is likely to hit the market after the holiday period, when demand will slump – prices are expected to be as low as 19ppl. This, and a natural increase in output, will pull the spot market down.

Milk Marque will have to try and squeeze some extra out of the system. But processors cant afford to pay much more.