Further uplift for milk prices as supply constraints persist

Farmgate milk prices have started the new year on a more positive note after a prolonged period of lower returns in 2023, with several milk processors committing to further increases in February.

Arla, First Milk, Barbers and Wyke Farms have all announced price rises in the past week.

A tighter supply of milk has been helping to support to markets with average daily milk deliveries in the autumn down by about 2-3% compared with the same period in 2022.

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

UK supply during the first eight months of the 2023-24 milk year (April to November) totalled 9.916bn litres, the lowest level for five years.

Improved demand

While supply has been tight, demand has been firmer and market sentiment has improved across almost all dairy commodities.

UK wholesale markets were well supported during December, with marginal gains on the previous month for cream, butter and mild cheddar. Cream and butter prices climbed above December 2022 levels.

Milk market indicators increased again during the month, with the actual milk price equivalent up marginally to 37.96p/litre, while milk for cheese value equivalent increased by 4% to 38.07p/litre.

At the first Global Dairy Trade (GDT) event of the year, on 2 January, the GDT price index increased by 1.2% to average US$3,363/t (£2,662/t).

This was the third consecutive rise in global dairy values, with butter and whole milk powder both increasing in value.

Dairy costings

Margin over purchased feed in October 2023 was at 24.66p/litre, according to figures from independent dairy consultants Kingshay.

Meanwhile, all purchased feed costs accounted for 12.5p/litre of the milk price.

Felicity Gale, farm services specialist at Kingshay, said some milk buyers were increasing their milk prices due to lower milk volumes than expected, both in the UK and EU, and globally.

Ms Gale added that concentrate prices had decreased and were 11% lower on the year in October 2023 at about £328/t.

“Overall, the margin over purchased feed per cow was 36% lower in October 2023 at £170 a cow, compared with £264 a cow in October 2022. This is back to the five-year average margin, but it doesn’t at all cover the significant increases in non-feed costs that we have experienced over the past two years,” she said.

Milk prices

Arla increased its farmgate milk price by more than 3p/litre for a manufacturing litre to 39.18p/litre in January. Its organic price increased by 2.96p/litre to 46.50p/litre (manufacturing).

Arla Foods amba board director and Arla farmer Arthur Fearnall said retail sales continue to pick up after the turnaround in the third quarter of 2023.

“Global commodity prices continue to recover as well. However, they are slightly weakened after seasonal demands are fulfilled,” said Mr Fearnall.

Paul Savage, Arla UK agriculture director, added: “Both conventional and organic markets are coming back to growth and our retail branded sales continue to improve. With a stable outlook, this latest and significant increase should give confidence to our farmer-owners as we start a new year.”