Projected price changes – how well do they work?

Published 24 January 19

AHDB has been publishing information on expected changes to farmgate milk prices for almost a year. These are based on the historic relationship between movements in the market value of milk and subsequent changes in milk prices paid to farmers. But how well has the indicator performed?

The graph below plots the estimated price change alongside actual changes made by milk processors*, showing the range between the highest and lowest price change in the month.  With only a few exceptions, the projected change in milk price has fallen within that range.

projected v actual farmgate milk prices 

The projected price movement is designed to provide an indication of the direction and size of expected milk price movements based on changes in the market. It will not necessarily equate to actual price changes made by individual milk buyers. However, overall, it can be said that the estimated movements in milk prices have been a good indicator of what has actually occurred at farmgate. The occasional difference in the timing of price changes would be expected due to other influences such as the degree of competition for milk in the market, changes to available processing capacity, import competition and contract negotiations.

 

*includes milk buyers included in the AHDB Dairy League Table