news brief 22nd August 2014
Market watch By Chris Walkland, market analyst for The Provision Trade Federation
There’s no way to dress-up what’s happening in the market right now. The fact is that 25p could be the farm-gate milk price for some farmers in the UK sometime soon.
cheddar
33%
Previous reports have highlighted the global situation and although the GDT auction fell by only 0.6% this week, it included big falls for cheddar which has now dropped 33% this year. Then, following Russia imposing its trade ban on the EU, dairy markets across Europe are collapsing. Dutch butter fell €150 a tonne to €3200 this week and SMP dropped €250 to €2150 – that’s 10% in 1 week and 34% this year! (see graph below) Here in the UK the cream price has dropped from £1350 to £1100. On these figures AMPE (actual milk price equivalent) would be 25.4ppl. Where will the bottom of the market be? Currently, no one dare call it. But unless the EU intervenes as it has done on fruit it will be low, and for a fair while too as the ban will last a year (at least). Meanwhile the cows continue to churn out more milk than anyone needs even in a good market – and we’ve the implications of quota removal in April to contend with. Fortunately there isn’t much cheese trading being done at the moment because buyers are covered, but with the hundreds of thousands of tonnes of cheese from Europe no longer destined for Russia, and being returned, the market will be unable to absorb it.
34%
Meanwhile milk price tracking models are starting to reflect what’s happening - The Ulster Farmers Union’s Milk Price Indicator was at 26.03ppl – but that was before the latest collapse this week.