Lower farmgate prices on the horizon

Published 29 October 18

Milk prices in the new year look set to drop if wholesale markets continue to weaken. Milk production continues to perform well as the mild autumn weather has supported grass growth. However, demand has weakened on the back of the long period of high prices, leading food manufacturers to look for more affordable ingredients. 

The lower product prices have resulted in a 1.5ppl drop in the equivalent market value of milk (MMV) for October. This is the largest drop seen since January 2018, when the MMV fell by 1.9ppl.  Based on historical relationships, the recent drop in the MMV would be expected to result in lower farmgate prices[1] on average in the early part of 2019. 

How individual farmers are affected will of course depend on the markets in which their milk buyers operate, how exposed they are to market volatility and the price-setting mechanism they use.

Projected Farmgate Price Changes

[1] Excluding cost of production linked prices