Dairy Markets July 21, 2016 12:00 am Production UK milk production has turned sharply downwards. According to AHDB Dairy, deliveries in Great Britain for the fortnight up to the 2nd July were 10% down on the same time last year. Indeed, production in the period was below the 5-year average. It is not yet clear whether this is a blip caused by the weather, or a more significant and long-term drop in the output trend. Whilst the wet spring has helped grass growth, the quality of grazing is often not great. With the concentrate/milk price ratio unfavourable, little supplementary feed in going on, leading to the drop in output. Whilst by no means is this yet a milk shortage, some processors appear to be getting nervous about future supplies. It is reported that some are restarting recruitment, whilst others are offering financial incentives (i.e. a boosted milk price) for selected farms to keep them in production. Prices At the global level, the last GDT auction on the 19th July saw the index of prices remain unchanged. Values have remained largely unchanged now since the start of June. This indicates that supply and demand are in reasonable balance at present. In the UK, both the reduction in supplies and the weakness of Sterling following the Brexit vote are helping to turn the market. Following last month’s announcement by Meadow Foods, a number of price rises have been seen from other milk buyers; The Tesco formula price rises by a fractional 0.02ppl for the next three months from the 1st August. This means farmers receive 28.71ppl those on Muller formula contracts will see a 0.45ppl increase from 1st August (largely thanks to a uplift in cream values) Muller Wiseman have held the milk price for July at 18.66ppl and have announced it will go unchanged for August. However, the milk cheque for June will contain a 3.05ppl Retail Supplement. This derives from sales through Aldi, Lidl and Morrisons – it is not payable to those on the formula or aligned contracts Sainsbury’s have lowered the milk price by 0.68ppl under their cost of production model. This is a result of lower feed, fert, and fuel prices. The Muller Sainsbury’s standard litre is now 29.3ppl, before seasonality First Milk have increased their milk price for July by 0.5ppl for the A litres (between 15.8 and 17.2ppl for the different pools) and 2ppl on the B litre range which now stands at 14-16ppl Lactalis is increasing its price by 1ppl from August, and then another penny from September South Caernarfon Creameries (SCC) has increased its price by 0.5ppj as from 1st July and will add another 0.75ppl from the 1st August. Following the example of Morrisons, Asda is also launching a ‘Milk for Farmers’ in its stores. An Arla-branded product will have a premium of 25p for 4 pints over the normal Asda milk, with the extra being returned to producers.
