UK farmgate milk prices climb despite weaker global markets

Many British dairy farmers will receive higher milk payments during July and into August as processors lift farmgate prices in an attempt to secure supplies.

Price rises during the summer months have been driven by a combination of increased buyer interest in domestic markets, better retail demand and reduced availability.

UK wholesale prices in June were up across all dairy commodities, with butter up by 42% on the year at £5,660/t.

See also: Organic Herd set to lift milk price to 54p/litre in August

Meanwhile, supplies continue to drop back and the latest industry forecasts suggest that GB milk production could be 1% lower for the 2024-25 milk year at about 12.2bn litres.

Susie Stannard, lead dairy analyst at AHDB, said: “Shortages of milk have sparked fears for buyers who have finally stopped sitting on their hands and started buying, particularly fats.”

She added that retail demand had been healthy with sales of cheese up by 5% and yoghurt up by 12% in recent months.

However, global dairy markets appear more subdued with less demand reported from China so far this year for imported products.

The Global Dairy Trade (GDT) auction had its biggest fall of 2024 on 2 July at its fortnightly event.

Wholesale dairy values dropped by 6.9% compared with the previous auction with big declines in average prices for milk powders, butter and cheddar.

Cost of production

Better returns for dairy producers throughout the summer months should help to improve margins on farms, however, cost of production still remains fairly high.

Nick Holt-Martyn, principal consultant at The Dairy Group, said milk prices above 40p/litre will be welcome, but more is needed if the gap to the cost of production is to be closed.

“Looking at the cost of production over the past two years at 43.8p/litre in 2022-23 and 43.4p/litre in 2023-24, it is clear that milk production is not sustainable at the current level of milk pricing,” he added.

Analysis by Kite Consulting found that UK dairy farms would also require an additional 2.4p/litre over the next 10 years, on top of current costs of production, to be able to invest in infrastructure on farm to meet existing and future environmental compliance regulations, such as covered slurry storage.

Milk price moves

July

• Pembrokeshire Creamery in south-west Wales has recently opened, after receiving investment by the Welsh government, and will initially pay 40.62p/litre for a standard liquid litre
• Welsh rural affairs secretary Huw Irranca-Davies said he was delighted the new Pembrokeshire Creamery had started processing Welsh milk for Lidl and Asda
• Arla will pay its conventional producers 41.7p/litre for a standard manufacturing litre, an increase of 0.81p/litre
• Arla Foods amba board director Arthur Fearnall said commodity markets were increasing, driven by a higher fat price and the outlook overall was stable

August

• Muller will hold its standard liquid milk price at 39p/litre for its direct suppliers
• Producers supplying Barbers Cheesemakers will receive a 0.52p/litre increase to 41.8p/litre for a standard manufacturing litre
• Freshways producers will receive a 3p/litre price increase to 40p/litre
• First Milk will increase its price by 0.7p/litre to 41p/litre (manufacturing)