April Dairy Update

Production Stays Low

UK milk production fails to show any sign of recovery.  Figures from the RPA report deliveries in March fell to just 1,108 million litres, approximately 113.8 million litres (9%) below the production levels of March 2012.  Cumulative production stands at 12,970 million litres compared to 13,517 million litres at the same point last year, a long way short of quota for the year.  With conditions only just starting to look better and nightly frosts in some areas a recovery is likely to take some time.  Cumulative butterfat stands at 4.07% compared to 4.06% at the same time in 2012, the five year average stands at 4.03%.

Price Cuts and Rises

After the shock announcement that First Milk may have to cut their cheese contract prices unless it can negotiate higher prices from its suppliers (including Asda, Morrisons and the Co-op) a spokesperson has indicatedthat it is making progress in talks with retailers.  In the same month Arla and Dairy Crest have announced price increases for their suppliers.  Dairy Crest has stated that its standard milk price will increase by 1.5ppl in June as a response to tighter global supply; this takes the headline price to 31.37ppl.  A 1ppl increase has also been agreed for producers on the Davidstow milk for cheese contracts.  From the 29^th April the Arla Milk Link price will increase by over 1ppl to 30.21ppl.

Following the announcements earlier in the month the Muller Wiseman Milk Group have also announced a 1ppl price increase.  This brings the processors increases since October 2012 to over 5ppl to 31.5ppl as of 1^st June.

Global Market

Droughts have substantially reduced production in New Zealand and Australian producers have seen a record fall in production of 9.2% in February.  This, combined with the poor production level in Europe has led to a tightening of global supply.  Rabobank agrees with our forecasts that the dairy market is likely to remain tight for at least the next six months.

Other Dairy News

Muller Wiseman has been given the go ahead to build the UKs largest butter factory at their site in Shropshire.  Approximately 100 jobs will be created at the plant which will use 90,000t of cream (a by-product from their liquid milk processing) to produce up to 45,000t of butter.

The Milk Race cycling event is to make a return this May.  The multi-stage event which initially ran between 1958 and 1993 which was previously sponsored by the Milk Marketing Board is expected to feature World and Olympic Champions when it returns to Nottingham this year.

Farmers for Action (FFA), which formed to fight for fairer milk prices and led the SOS Dairy Campaign last summer, have pulled out of the SOS Dairy Coalition.  FFA leader David Handley announced that the organisation was leaving the coalition because of disputes over milk protests and the Dairy Code however would continue to work with individual members.

More dairy farmers will have a chance to access money from DEFRA’s £5m dairy fund as the deadline has been extended. Funding is aimed at farmers establishing collaborative or co-operative ventures and those exploring new market opportunities. The deadline for applications has now been extended to Monday 3^rd June 2013.