Dealing with milk price volatility

Published 18 October 16

Recent analysis* has shown there are stark differences in the level and stability of farmgate milk prices, depending on which market milk goes into. Knowing this can help farmers plan the level of market resilience required at farm level, as well as manage expectations around milk price movements. 

Farmers supplying processors who operate in more volatile markets, such as powders and bulk dairy ingredients, can expect to be exposed to the ups and downs of commodity market cycles. Operating in this environment makes it important to understand and monitor these markets, build sources of resilience and prepare for when they shift. It means taking a longer-term approach to managing the business, considering the full market cycle in order to withstand the downturns. 

For others, such as those farmers paid on the basis of a formula or production costs, prices tend to be more stable. This means there is a need to accept the trade-off between the stability they offer and achieving the highs at the top of the cycle. 

*How stable is your milk price? and How exposed to commodity markets is your milk price?