Milk Production & Prices

Provisional figures from the RPA show production continues to out perform year-earlier levels.  Milk deliveries for October stood at 1,155.4 million litres, 6.2% more than October last year.  Cumulative production now stands at 8,558.8 million litres; 7.9% more than at the same time in 2013.  But all this milk is not helping farmgate prices.

Last month we reported that the Fonterra Global Dairy Trade (GDT) auction recorded a small increase in the overall auction index (compared to the two weeks previous), but this would only suggest the downward trend is reversing if the next auction also increased.  This has failed to happen.  The GDT auction at the beginning of November only recorded a marginal drop of 0.3% for the overall index, butthe latest auction held on 18^th November showed a further 3.1% decrease, taking the average price for all products across all contracts down to US$2,561 per tonne; the lowest price since August 2009.

With production not expected to slow down anytime soon, the downward pressure on farmgate prices is likely to remain well into 2015.  Dairy Crest has announced its formula contracts will be cut by 0.798ppl from 1^st December, taking the standard litre price below 30ppl.  Arla is also reducing its price from the 1^st December – down 1.63ppl to 26.84ppl.