Archive: Milk price changes reflect exposure to markets

Published 22 October 14

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Since they started to fall in April 2014, farmgate prices have been cut by between 0.75ppl and 8.40ppl*. It is interesting to note that the largest price cuts have been made by milk buyers who sell milk into ‘commodity’ markets where little value is added and there is less protection from longer term contracts.

For these milk buyers, not only have they faced diminished returns due to falling wholesale prices they are also more reliant on selling their excess milk into spot markets, which react quickly to imbalances in supply and demand.

The graph shows how prices paid on non-aligned liquid or manufacturing contracts have dropped by 16%-18% between April and November. Prices paid on milk for cheese or retailer-aligned liquid contracts have also dropped, although they have been more insulated from spot markets and have therefore show relatively smaller drops.

Milk price changes 22.10.14

*includes price changes announced to take effect from 1 November 2014