Monthly Commentary on Milk Price Changes

Published 8 February 19

Milk prices mostly moved down in February with the majority of milk buyers announcing price reductions, ranging from 0.25ppl to 1.00ppl. The exception was a small upward move of 0.37ppl on Tesco aligned contracts in line with their regular review.

Looking ahead to March price changes, both Barbers and Dairy Crest have announced they will maintain prices for the month. Müller announced a cut of 1.25ppl for March, attributing it an oversupply of milk. Combined with its earlier price cuts, prices paid to their non-aligned, direct suppliers will have dropped by a total of 3.25ppl between December and March. Few other buyers have yet to announce changes for March or April.

UK milk production in December came out at a 25 year high, with volumes increasing further at the start of 2019. The increases in milk production over the winter period have undoubtedly weighed on wholesale markets, pulling down prices during the tail end of 2018. Cuts to farmgate prices in the early part of this year have generally followed on from these declines, and been roughly in line with changes suggested by AHDB’s Milk Market Value (MMV) indicator.

Some firmness crept back into the market in January however, as SMP intervention stocks disappeared and buyers returned to the market after the holidays. This should provide some support to processor returns from April if the positive trend in pricing continues. The amount of support however will depend on the processors’ product mix as declining product values has impacted more on AMPE (butter/powder) than MCVE (mild cheddar) in recent months.

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