Monthly Commentary on Milk Price Changes

Published 3 January 18

As mentioned in the last milk price commentary, Müller introduced a 1.5ppl reduction for January for its direct suppliers. Since the time of writing that, on 4 December, other processors have also introduced reductions, with the majority being around the same level. All of those reducing are quoting the falling wholesale markets as a reason for the reductions. UK Arla members were protected somewhat this month by the quarterly currency smoothing in its pricing mechanism. The European co-op introduced a 2.5 eurocent (approx. 2.3ppl) reduction for conventional milk. 

Some milk buyers have continued to hold prices for now, but, depending on specific situations, this is likely to change in February/March.

UK wholesale prices have been under pressure since the end of the summer with butter and cream falling from record highs. Although wholesale prices have seen sharp falls, all bar SMP, are still relatively high compared with historic averages. The build up to spring milk will likely be an uncertain time as buyers will refrain from committing to the market, unless product is needed, in the anticipation of prices reducing further. However, there are a number of factors, most notably weather, that could influence milk production and then the supply/demand balance.

When assessing individual milk buyer performance, farmers are advised to look at the following factors:

-          Do milk prices go up when markets are rising as quickly as they come down when markets fall?

-          Is the milk price competitive with processors operating in the same markets?

-          Has there been any level of protection and/or premium from the volatile wholesale markets?

-          Are you maximising your own return based on what your milk buyer is paying?

The AHDB milk price calculator can help farmers with this assessment.