Milk Prices

There doesn’t seem to be any Christmas cheer for UK dairy producers as farmgate prices continue to fall.  DEFRA’s latest average farmgate price is for October and it stands at 29.71ppl.  However, with further cuts since then, prices being received now will be lower than that and further reductions continue to be announced.  The most notable ones are;

As from 1^st December;

• A 2ppl reduction for South Caernarfon Creameries
• 1.6ppl cut for Paynes Dairies suppliers
• 1.5ppl reduction for suppliers to Belton Cheese, Crediton Dairies and Glanbia

As from 1^st January;

• There will be a (whopping!) 6.19ppl price reduction for Muller formula producers – see below
• Wykes farm will cut its price to suppliers by 1.4ppl
• Both Dairy Crest and Meadow Foods have announced a 1.25ppl reduction
• First Milk Liquid and Waitrose (Dairy Crest) have both announced a 1.1ppl cut.  However, showing the divergence in prices, although both fall by the same amount, the First Milk price drops to 21.7ppl, whilst the Waitrose price after the cut will be 33ppl.
• First Milk cheese suppliers will receive a 1ppl reduction
• SDDG (Sainsburys) suppliers will receive a 0.81ppl cut in the New Year

The Muller formula price is based on the AMPE (50%), MCVE (25%) and a basket of competitor prices (25%).  It was therefore inevitable given the current prices for these (see Key Farm Facts) that the quarterly review would result in a considerable drop in price.  This will now be the price for the first quarter of 2015.

There maybe some slight signs of cheer though.  The latest Fonterra (GDT) auction, although showing a 1.1% drop in the overall average all products index, this was due to a 7.1% fall in WMP.  But taking a look at the other commodities SMP, Cheddar and Butter all show increases compared to the last auction a fortnight ago (5.7%, 5.2% and 7.3% respectively).  But there is unlikely to be any significant change in prices until supply and demand realign themselves.