January Dairy Update April 17, 2013 12:00 am Production Stays Low Latest figures from the RPA show UK milk deliveries stood at 1,035.9 million litres for December. An initial glance reveals this is 62.4 million litres more than in November 2012 and is the first time production has increased month-on-month since back in May. But on further analysis, it is 61.7 million litres less than December 2011 production and 30.8 million litres less than the average for the last five years. It is the sixth consecutive month that production has been below year-earlier levels. UK daily figures provide further evidence to show production remains low. Deliveries for the two weeks ending 12th January 2013 averaged 33.8 million litres per day. This is 2.1 million litres per day (5.8%) lower than over the same period last year and 2.6% less than the 3 year average. To what degree, if any, production can recover by the end of the milk year remains to be seen. Due to poor quality forage, supplementary feeding is the only option currently available to many producers. But high costs for such feed means these would require further rises in the milk price to make this economically viable. Grazing conditions at turnout will be crucial if production is to recover, this will depend heavily on the weather over the next couple of months otherwise supplies could take even longer to recover. Price Cut for Milk Link (Arla) Producers Whilst milk prices in general have been moving upwards, Arla Milk Link has informed its members that their milk price will be cut by 0.23ppl as from 7th January. As expected, members are outraged, further fuelled by the fact that according to them they were only given four days’ notice. But in the processors defence the cut is entirely due to currency effects, with a pricing formula (which was introduced when Arla and Milk Link merged) linked to the Danish Arla Amba price and adjusted for a 24 month currency average every quarter. Although it will come as little consolation, the cut could have been worse. The Arla Amba price in Denmark has been cut, but as a special concession this will not impact on Arla Milk Link prices in the UK as the processor expects prices to recover in the spring. The latest cut sees the Arla Milk Link price near the bottom of the UK milk price league table. Meanwhile some prices are going up, as Wyke farms has announced it is to increase its milk price by 1ppl for its direct suppliers as from 1st February. Commodity Prices Results from latest Fonterra Global Dairy Trade Auction show milk product prices continue to firm albeit at a slightly slower rate. The average price for all products increased by 1.1% to $3,442 per tonne the third successive increase for the overall index. WMP rose by 2.8% to average $3,288, although SMP prices were down on the previous auction by 0.3% to $3,552 per tonne. Closer to home Northern Ireland’s United Milk’s first auction for 2013 saw milk auction prices fall by 1.2ppl compared to last month to average 28.19ppl for 40m litres. But prices remain very similar to those obtained at the same time last year (28.15ppl) before they collapsed in May/June. Business News Arla Milk Link continues to be in the news, this time because the processor has lost its contract to supply Iceland’s own label range of hard cheeses. As from 1st February, Adams will supply Cheddars and British regional cheeses to Iceland’s 779 stores throughout the UK. Adam’s who own the Pilgrims Choice and Mu cheese labels is part of the Irish Dairy Board who secured a £16m deal with Tesco in November to supply butter to its stores across Eastern Europe. The Muller Wiseman Group has announced it is planning to have the UK’s biggest butter production facility at its site in Market Drayton, Shropshire. Production is set to begin this Autumn. The £17 million facility will be able to handle 90,000 tonnes of cream and produce 45, 000 tonnes of butter. The new plant is expected to produce primarily commodity butter but a move to branded butter can’t be ruled out. Rabobank Rabobank has adjusted its forecasts in the latest Dairy Quarterly. In its latest estimates it envisages that the market peak will be later and not as strong as forecast in its last edition. For the first three months of 2013, production in the Northern hemisphere is expected to be low through the winter, whilst the Southern hemisphere is likely to have a weak end to its season with output from the main exporting countries below 2012 levels. Rabobank now expect the market to peak around the middle of the year, any unusual weather events will obviously impact on any recovery. Markets will tighten further if there is any increase in demand from importing countries, a situation which is considered likely.
