Projected Farmgate Price Movements

Published 28 August 19

The table summarises the expected impact on farmgate milk prices (in three months’ time) resulting from movements in the Milk Market Value[1] (MMV).

Wholesale product prices were quiet in August with low volumes traded. Movements in currency influenced prices. Overall fats were down, SMP up and cheese unchanged. The downwards movement in butter outweighed the SMP lift and brought AMPE down 0.2ppl overall. MCVE was down 0.1ppl on the back of falling whey prices. The effect of these price movements on the overall market value of milk (MMV) was a 0.1ppl decline, suggesting some upcoming weakness for market-driven farmgate prices over the next few months.

It is important to note that the figures simply provide an indication of the direction and size of expected milk price movements. They will not necessarily equate to actual price changes made by individual milk buyers.

 Projected Farmgate Price Changes Table
* figures may not add up due to rounding
Source: AHDB Dairy estimates

The projected change is based on the strong link found between movements in the value returned to manufacturers from the market (MMV) and movements in farmgate milk prices.

On average, it was found that a 1ppl change in the MMV will lead to around a 0.6ppl change in the overall GB average milk price, generally three months’ later.

Differences will arise due to the markets in which milk buyers operate as well as the mechanism they use to set the milk price. These will impact the timing of price movements as well as the size of the change.

Other factors which are likely to impact milk prices will be the degree of competition for milk in the market, changes to available processing capacity, import competition and contract negotiations.

 


[1] The Milk Market Value (MMV) is a weighted average of AMPE and MCVE on a 20:80 basis. This was found to be the best predictor of movements in farmgate prices based on historical data. The analysis was done excluding prices paid on retailer-aligned contracts.