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UK Wholesale Prices
Published 27 October 16
Market views taken for trade occurring between 1 to 26 October. Prices reported are indicative of values achieved over the reporting period for spot trade (excludes contracted prices).
UK dairy wholesale prices continued to climb during October and have now been on an upward trend for the last six months. Short supplies following the slowdown in milk production helped to push prices up again this month, particularly for the fat markets. Sterling also weakened further against the euro, making UK product more competitive in Europe and providing an extra boost to UK prices. However, processors had relatively little spare product to sell on the spot market this month, making it difficult to take full advantage of rising prices.
Cream spot market prices started the month around £1,900/tonne and steadily increased, with weakening sterling helping to move UK product into Europe. By the end of the month, prices approaching the £2,000/tonne mark were needed in order to secure deals. However, volumes actually traded at this upper level were reported to be limited by a shortage of cream available on the spot market.
Rising cream prices also helped push up butter prices throughout October, with fat supplies tight. Although much of the butter in Private Storage Aid is thought to have been pre-sold already, some was still traded this month at around £3,500-3,600/tonne. However, a second tier in pricing was also seen this month, with freshly manufactured butter fetching a premium price of around £3,900-4,000/tonne towards the end of October. Although demand was fairly tentative, those looking for cover needed to pay relatively high prices to secure product, as little butter was available for spot trade.
SMP spot prices increased to an average of £1,860/tonne in October, partly due to weaker sterling helping to boost UK prices. Some market driven uplift also contributed to the rise but this was dampened to some extent by the significant volume of powder still sat in storage.
Mild cheddar prices also felt the benefit of sterling’s weakening against the euro, which helped stir some demand from Europe in an otherwise quiet marketplace. This, combined with the limited volume of cheddar available for spot trade, helped provide some uplift for UK prices.
Notes: Prices have been compiled by talking to dairy product sellers, traders and buyers. Panel discussions on market conditions and prices covered trades agreed for the period 1 to 26 October. The published prices will not necessarily match the actual price received by a milk processor as this will depend, amongst other things, on the proportion of product that is sold on the spot market and the proportion sold under longer term contracts and at what price this is done.
AHDB has made the decision to suspend publication of wholesale mild Cheddar prices as of January 2016 due to the lack of spot trade and the inability to quote a price representative of completed spot deals.
The lack of trade has highlighted limitations of the spot price and increased the risk of misperceptions of what the price represents. In Cheddar markets, where a large proportion of sales will be on contract, spot prices can vary significantly from contracted prices – especially when stock levels are out of kilter with demand. More information available.