Product mix is one key influence on price volatility

Published 18 May 16

In recent analysis, it was found that the proportion of milk sold through co-operatives in the EU-28 did not appear to shelter farmers from the impacts of global price volatility. The use of milk[i], and a country’s exposure to global markets, does however appear to have an impact on the volatility of milk prices.

The graph shows that countries with a larger proportion of milk going into SMP and butter tended to experience a larger range of milk prices. This is especially the case when a significant volume of these products is exported. UK farmgate prices showed some of the least variation within the EU, similar to France, Poland and the Czech Republic. This will in part be due to the focus on fresh milk and cheese, which account for around 75% of the milk produced in the UK.

product mix impact on price volatility

[i] The proportion of milk going to butter and milk powder production was used as a measure of exposure to global markets as prices for these products move closely with world prices and are generally unable to command premiums.