Milk Market Update

There is still little cheer in the milk market.  At the global level the latest GDT auction (on the 19^th May) the index of prices fell by a further 2.2% to $2,472 per tonne.  This is the lowest level seen since August 2009 and 36% lower than at this point last year.  Volumes going through the auction are still high.

Domestically, Arla has announced a milk price cut for its co-op members.  The price farmers receive will fall by 0.84ppl as from the 25th may (equivalent to 1 Eurocent per kg).  This takes the standard litre price to 24.99ppl.  Arla increased its price in April as the global market was showing signs of recovery.  It was held for May, but with commodity values still weak it seems the co-op has had no choice but to adjust its pricing.

All this tends to suggest any milk price recovery is slipping further away.  Rather than the summer or autumn it may well be towards the end of the year before we see sustained price increases at the UK farm level. 

The difficulties in the milk market are illustrated by Dairy Crest.  It has announced its year-end results for the 2014/15 financial year.  This saw pre-tax profits fall by 60%.  The ‘Dairies’ (i.e. liquid milk) division did far worse than the Cheese and Spreads side of the business.  Meanwhile, farmers supplying Dairy Crest have created the first ever dairy Producer Organisation (DPO) in the UK.  ‘Dairy Crest Direct will now have the the legal power to negotiate contract terms and milk prices on behalf of its farmer members.  Alterations in prices and contract terms should now be agreed through negotiation rather than at the discretion of the buyer.