Farmgate milk prices set to rise in 2024 after months of lows

Many dairy producers will start to receive a higher milk price in the new year after several milk processors committed to the rises.

Farmgate milk prices were on a downward trajectory for most of 2023, with values roughly 15p/litre below where they were this time last year.

However, dairy commodity markets have been improving throughout the autumn and some processors, including Arla, Barbers and Saputo, have started to announce the first significant milk price rises for more than a year.

See also: Farmers in Northern Ireland wary of dairy sustainability deals

Cheesemaker Barber’s reported that the forward momentum in dairy markets has been fuelled by the reduced milk production across the UK, EU and US.

Ian Powell, managing director of The Dairy Group, told Farmers Weekly that it is good to see cheesemakers contributing to farmgate milk price increases, especially after cheddar markets had been struggling.

He suggested these price moves could also encourage increases by other milk processors in February.

Mr Powell said cost of production for dairy producers remains high and margins continue to be tight on farms, with some still in a loss-making position.

Milk supply is likely to remain low throughout the winter, according to The Dairy Group, with the wet weather restricting cow performance.

UK daily milk deliveries are currently running about 2% below this time last year.

Meanwhile, GB milk production is forecast to be down by 1.3% for the 2023-24 milk year at 12.22bn litres, according to AHDB estimates.

Much of this fall in supply is due to producers cutting back output as a result of milk prices falling below the cost of production.

Figures from the Agricultural Budgeting and Costing book forecast total cost of production at 37.4p/litre in 2023. However, Defra’s average monthly farmgate milk price was consistently below this figure between May and October.

Concentrates and bulk feed accounted for 9.6p/litre of the total cost of production, while forage costs accounted for 2.7p/litre.

Dairy demand

Milk market indicators rose during November, with the actual milk price equivalent up by 9% on the previous month to 37.67p/litre, while milk for cheese value equivalent increased by 6% to 36.53p/litre.

UK wholesale prices for cream, butter, skimmed milk powder, and cheddar also made gains during November.

Susie Stannard, AHDB lead dairy analyst said: “The latest wholesale prices would indicate that milk prices could begin to move in a more positive direction in the first quarter of the new year, but the extent to which they might recover remains uncertain and much will depend on the recovery of global demand.”

At the latest fortnightly Global Dairy Trade auction on 5 December, global demand had improved, with the index up by 1.6% to average US$3,323/t (£2,632/t).