Farmgate milk prices return above 40p/litre as demand firms

A welcome rise in farmgate milk prices means some dairy farmers will receive more than 40p/litre for the first time in 12 months.

Several processors have lifted their payments in March and April, with further gains forecast in the coming months if markets remain buoyant.

Improved domestic demand and tight supply for the time of year are both helping to drive the market up in the short term.

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UK wholesale milk markets remained fairly supported in February, with butter up 2% on the month and 24% on the year to average £4,850/t. Bulk cream, skimmed milk powder and mild cheddar values all remained relatively stable during the month.

Increase in dairy sales

GB household dairy purchases have increased in value by 10.2% on the year, significantly outperforming sales of plant-based alternatives, which were up by only 2.7%.

Michael Haverty, partner, and senior research consultant at Andersons, said: “We see scope for some increases, but more of a slow and steady return for prices.”

Global markets have been more mixed, with weaker demand in China. This can be seen in the latest global dairy trade auction figures with the price index down by 2.3% to US$3,630/t (£2,855/t).

Mr Haverty added there was likely to be less of a boom-and-bust cycle than the market had witnessed in recent years.

This is partially due to key supply regions, including the EU and New Zealand, not being able to respond to price signals as efficiently, because of environmental constraints and nitrate issues.

While some price rises are expected, they are less likely to return to highs of 50p/litre, according to the consultancy firm.

Andersons’ “Friesian Farm” model forecasts a more positive production margin for the 2024-25 milk year, based on predictions of marginally lower costs of production and a higher average milk price.

Supply

Despite seasonal increases, milk supply still remained below last year’s levels throughout February.

GB daily milk deliveries were up 1% on the week, but down 1.4% on the same week last year in late February to average 33.83m litres a day.

Industry forecasts suggest that GB milk production could decline by about 1% overall during 2024.

Soumya Behera, AHDB senior dairy analyst, said: “Improving farmgate prices and lower costs during the past few months have resulted in a more favourable milk-to-feed ratio, thereby encouraging production for some, which has meant production declines are less than expected.”

Seasonal weekly milk production in western Europe continues to increase, but it is still below the previous year’s levels, according to the US Department of Agriculture.