Milk prices keep climbing with spring peak likely to be low

Farmgate milk prices have continued to rise in May and June, with total production volumes running well below last year’s levels as the sector approaches its annual peak.

Dairy processors have been increasing farmgate prices as buyers look to secure consistent volumes into the summer months.

GB daily milk deliveries have been running 2.2% below year-ago levels in recent weeks, despite making steady seasonal increases throughout March and April.

See also: Fairer dairy contract regulations come into force in July

Diarmaid Mac Colgain of milk marketing platform Concept Dairy told Farmers Weekly that producers still typically need to be receiving about 42p/litre to be making a return.

He said farmers on liquid milk contracts are generally doing OK, but those on cheese-based contracts are more likely to be struggling at current levels.

Mr Mac Colgain added: “You have to really factor in the costs we’ve had over the last couple of months with animals not able to go out onto grass and the increased fodder charges.”

However, grass growth has improved, with dairy farms averaging 47kg/ha of dry matter (DM) daily for the week beginning 29 April according to GrasscheckGB, which should help to reduce feed costs in May.

Outlook

Looking forward, Mr Mac Colgain said there could be some increased global competition for mozzarella, cheddar, and milk powders partially due to demand in China being forecast down by about 14% year-on-year.

A free trade agreement between the EU and New Zealand came into force on 1 May, which may well have a knock-on impact for UK dairy exports.

Matt Darragh, analyst at AHDB, said: “The UK is likely to remain a key exporter of dairy products to the EU.

“Across the four dairy products, butter is the only category where New Zealand has held a notable market share, although this has since declined following increased exports to Asia and increased exports from the UK.”

Milk markets

UK wholesale prices for bulk cream and butter were up by 34% and 25% respectively during April compared to the same month last year. Meanwhile prices for mild cheddar and milk powders were slightly behind on the year.

Muller is set to increase its standard liquid litre milk price in June by 0.5p/litre to 38p/litre, including a 1p/litre advantage premium.

Richard Collins, head of agriculture at Muller said: “We recognise the challenges being faced this spring and will continue to monitor supply and demand in the coming months to ensure we support our supplying farmers.”

Crediton Dairy will increase its price by 1p/litre to 38.75p/litre for a standard liquid litre. Meanwhile, producers supplying Saputo Dairy will receive 1.5p/litre more for a standard manufacturing litre, taking its price to 39.5p/litre.

Arla dairy farmers will receive a May price of 40.45p/litre for a manufacturing litre, with prices up by 0.45p/litre on the month.

Arla Foods director and farmer, Arthur Fearnall, said: “Global milk supplies continue to be slightly lower, retail sales continue to rise and commodity markets are stable. In the UK, the organic milk price increase is driven by growing demand. Overall, the outlook is stable.”

Last week, Arla also announced the acquisition of Welsh whey processing and animal nutrition business Volac.

Luis Cubel, managing director of Arla Foods, said: “This brings together two complementary offerings in a growing and increasingly international space for whey products.”