Defra February milk price inflated by bonus payments

Published 4 April 16

The monthly farmgate price calculated by Defra for February was reported to be up by 2.48ppl to 25.57ppl. However, since bonus payments were made to many dairy farmers during the month for annual production, it does not represent how much GB farmers received on average for their February milk production (i.e. the value of each litre of milk produced).

Arla’s 13th payment was one of the main bonuses attributed to February’s milk payments in Defra’s calculation, although it actually applied to all volumes delivered in 2015. AHDB estimates this has inflated Defra’s figure for February by between 2.50 to 2.75 pence per litre. This would put the price, excluding retrospective bonuses, slightly below January’s figure of 23.09ppl, which is in line with how monthly prices have moved on the AHDB Dairy League Table.

The problem with the Defra figure, which is based on a sample of roughly 90% of total deliveries, is that it is simply a measure of the total amount paid by processors in a month divided by the volume of milk collected in that month. It does not represent the average value of just the milk delivered in the month in question. On occasions when retrospective bonuses are paid, these two prices can differ significantly, as they did in February when the extra Arla payment was made.  

Defra farmgate price excl bonus