Milk prices remain 5-10p/litre below current cost-of-production projections, putting dairy producers at risk of incurring significant losses.
Most milk purchasers kept farmgate prices low in September and October, however some processors slashed even more.
Despite the low costs, supply remains plentiful, and milk deliveries are up somewhat over the same time last year.
Milk pricing at the farm level
- Arla has reaffirmed a manufactured litre price stay of 35.12p/litre in September, and an organic price of 40.79p/litre.
- Dairy producers who supply Muller directly will continue to get 37p per liquid litre until October.
- In October, First Milk will maintain its manufacturing litre price of 36.85p.
- Based on a regular manufacturing litre, Barbers Cheesemakers has reduced their October milk price by 1.65p/litre to 36.14p/litre.
- According to industry sources, Saputo Dairy and South Caernarfon Creameries have also announced small cutbacks.
Daily milk deliveries in the United Kingdom averaged 32.1 million litres for the week ending August 26, up 0.5% from the same week previous year.
Demand remained weak, and prices for butter, skimmed milk powder, and mild cheddar fell in the UK wholesale markets in August.
Meanwhile, in August, the actual milk price equivalent (Ampe) market indicator decreased to 28.6p/litre, the lowest level in three years.
However, the recent weekly Global Dairy Trade (GDT) auction on September 5 showed some early indications of increasing demand.
Following four consecutive price drops, the GDT price index climbed by 2.7% to average $2,888/t (£2,300/t).
According to Chris Walkland, a dairy expert, the increase in the GDT was an encouraging indication, but not enough to reverse market sentiment.
“I wouldn’t say we’re out of the woods yet in terms of price cuts.” “The market has to pick up significantly for that risk to disappear,” he added.
Mr Walkland anticipates more of the same in the next month or two, given there is plenty of stock available. Longer term, he believes the market will be impacted by levels of demand from traders making purchases in the run-up to Christmas in the fourth quarter.
Arla Foods amba board director and farmer Arthur Fearnall said, “Inflation is finally softening, albeit slowly, and as a result retail sales are picking up.”
“Global commodity markets have turned negative this summer, but European markets have been more stable.” The prognosis is positive. However, commodities market changes have created considerable uncertainty.”
Farmers at Sainsbury’s face a price increase.
Farmers who are members of Sainsbury’s Dairy Development Group will get an extra 1p/litre on top of the cost-of-production price from October 1.
Farmers that satisfy the standards may additionally get an additional 1p/litre sustainability incentive.
Farmers in the association have gotten 2.45p/litre more on average than the rest of the market since its start.
“The dairy farming industry is becoming increasingly challenging,” said Gavin Hodgson, director of agriculture, aquaculture, and horticulture at Sainsbury’s, “and we recognize the responsibility we have as a retailer to support farmers, as well as the need for continuous investment in this sector.”
The figures
- 32.1 million litres Average daily milk delivery in the United Kingdom (w/e August 26)
- 28.6p/litre In August, the actual milk price equivalent (Ampe) was 2.7%. On September 5, there will be an increase in the Global Dairy Trade auction.
