Archive: EU milk margins drop by 9% in three months

Published 10 December 14

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The average gross margin for EU dairy farmers, as reported by the EU Commission on a quarterly basis, has made its first significant decline in more than two years as falling milk prices start to take effect. EU farm gross margins climbed steadily through 2013 and into 2014 in response to rising milk prices and slightly lower operating costs. The growth in margins started to fade from the start of the 2014/2015 milk year as farmgate prices were cut over successive months.

In the second quarter of 2014 (Apr-Jun), the impact of lower milk prices on overall gross margins was mitigated by reduced operating costs. However, the reduction in operating costs is likely to have been seasonal and in the following quarter (Jul-Sep), gross margins were squeezed as costs rose and the average EU milk price dropped. This led to a 9% decline in margin between Q2 and Q3. Despite this, the average EU gross margin in Q3 was still higher than in the same period a year earlier. However, it seems unlikely that the margins experienced in the final quarter of 2013 will be replicated this year as prices continue to face downward pressure. This could potentially limit the current rate of growth in EU milk supplies, although herd expansion and the lifting of quotas in four months’ time could go against this.