Farmgate milk prices to tumble in February and March
© Tim Scrivener Falling wholesale values are feeding through into lower farmgate milk prices, with almost all the major milk processors announcing price cuts for either February or March.
Both milk market indicators, the actual milk price equivalent (Ampe) and milk for cheese value equivalent (MCVE), fell during January, with wholesale prices for butter, mild cheddar and skimmed milk powder all in decline.
Ampe dropped 7% to 35.1p/litre in January, while MCVE fell 7% to 44.5p/litre.
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In December 2022, the average UK farmgate milk price was estimated at 51.51p/litre by Defra – 49% higher than December 2021. However, prices have since started to drop.
Nick Holt-Martyn, principal consultant at the Dairy Group, said the markets are down by 12% since peaking in October. Liquid and cheese prices have not yet dropped as far as other commodities have.
Supplies
According to Mr Holt-Martyn, the main measure that could support prices is a reduction in supply. However, current forecasts point to milk production remaining about 1-2% above last year’s levels for this milk year.
“If milk prices come down to near 40p/litre and the cost of production stays in the mid-40s, then you can start to see an economic squeeze taking place,” he said.
“On the positive side, it looks as if cereals prices are going to be subdued going through to harvest, though proteins are still sky-high. Fixed costs also keep going up, between 5% and 10%, and inflation is increasing elsewhere in the business,” he added.
The outlook for milk prices remains bearish, with average GB farmgate values projected to fall 1.4p/litre in February, 2.3p/litre in March, and a further 1.9/litre in April, according to AHDB estimates.
Kite Consulting forecasts a 45p/litre break-even point for dairy during February.
Processor views
Richard Collins, head of agriculture at Muller, said: “We are seeing a continued significant reduction in commodity prices driven by reduced demand, coupled with supply ahead of forecast.”
Arla’s agriculture director, Paul Savage, said the uncertain economic outlook meant farmers were facing a declining commodity market.
“We know our farmer-owners are still facing significant input costs for labour and energy, and we remain committed to continuously looking for ways to deliver the most value to their milk,” said Mr Savage.
Milk price moves
- Arla’s on-account conventional farmgate milk price decreased by 2.65p/litre from 1 February to 48.47p/litre for a standard manufacturing litre of 4.2% butterfat and 3.4% protein
- Muller has dropped its farmgate milk price by 3p/litre for March to 44p/litre, including its Advantage bonus, paid to most of its suppliers in quarterly instalments
- Producers supplying the Co-op through the Muller Co-operative Dairy Group are being paid 1p/litre less from 1 February to total 46.83p/litre for a standard liquid litre of 4% butterfat and 3.3% protein
- First Milk producers are due to be paid 45.69p/litre in March, down 4p/litre for a standard manufacturing litre
- Barber’s cheesemakers will reduce its milk price by 3.8p/litre in March to 46.11p/litre for a standard manufacturing litre
- Parkham Farms will pay 47.9p/litre in February for a manufacturing standard litre, a fall of 3p/litre, and a further 7p/litre drop is anticipated in March, taking the company’s March price to 40.9p/litre
- Farmers supplying Graham’s Dairy will be paid 44p/litre for a standard liquid litre in February, a 2p/litre reduction on the previous month