Processors’ returns starting to recover

Published 2 March 17

The sharp increases to dairy wholesale prices, which occurred in the autumn of 2016, appear to be flowing through into manufacturers’ selling prices. Tracking changes to the prices received by manufacturers using the Producer Price Index (PPI) suggests that the increased market value for dairy products is starting to appear in their sales prices.

The PPI measures changes in the prices of goods sold by UK-based manufacturers in the form of an index, and is updated monthly on the AHDB Dairy website. It is, therefore, useful as an indicator of movements in factory-gate prices of manufactured products.

The PPI for both liquid milk and cheese has fallen in the two years between April 2014 and April 2016, indicating declining returns for manufacturers. These appear to follow the general movement in the market (as measured by MCVE), although with a lag of around three months. The lag is likely due to delays in renegotiating contracts. 

03. Processor Returns Graph