AHDB reveal impact of aligned milk on average prices

Published 16 August 17

AHDB has published a new farmgate milk price series which removes the estimated impact of retail-aligned prices from the GB average. The impact of retail-aligned prices on the overall GB farmgate milk price is estimated from the prices paid for milk according to contract type (liquid, cheese, other manufacturing), weighted by the relative volumes used in each segment[1].

Due to the cost-of-production pricing methods used to pay for milk supplied through retailer-aligned pools, prices for aligned liquid milk do not always track market conditions, and can have a distorting impact on the GB average price as reported by Defra[2].

Retail-aligned prices typically boost the Defra ‘all milk’ average price by 0.2ppl to 0.4ppl. However, when trends in production costs and market returns diverge, trends in aligned milk prices can be significantly different to non-aligned prices. This was evident during the recent downturn of 2015/16, when retail-aligned prices were adding as much as 1.5ppl to the overall GB average farmgate milk price.

GB farmgate prices_graph

[1] Further details on methodology in downloadable data file (see Notes)

[2] See notes from Defra