MILK MARKET UPDATE correction (down to 31p) is not unexpected. Many other companies have held their prices for September, though.
First the good news: the market is more positive now than at any time since early summer. EU butter and SMP markets started to turn positive in early August after eight weeks of steady decline, with prices down to a low of €3700/t for butter. Now there have been three consecutive weeks of increases with the price nearing €4000/t, which is a decent improvement.
So, what are the prospects going forward? Well Arla also states that the prospects “after the September decrease are stable”, and it is hard to disagree with it, especially given the current positive market moves. If it wasn’t for them, I’d have been concerned for price decreases.
It’s obviously great news, but buyers will become increasingly resistant at that level. But they do not have milk volumes on their side to enable them to stand back from the market too long: UK volumes are currently tracking around 0.75% on last year, and Germany – the EU’s biggest producer – has been tracking well below last year’s levels since the middle of May. France, the second biggest, is also below last year. On an international front the dairy analytical organisation IFCN is also reporting that global volumes have fallen below a yearon-year growth rate of 1% - the first time it has done so since July 2019.
As it is, I can see stable farmgate prices, but there isn’t enough in the market just yet to make me think there will be increases. Cream isn’t strong enough yet, and neither the real market, nor the futures, or the GDT, are pointing to prices in the 30p range, where they need to be to cover most farmers’ costs. The September to October period traditionally isn’t a great time for milk price increases either - history shows that there aren’t many increases in this period. That said, milk volumes do focus buyers minds and we are now entering the trough period of the year. It’s as good a time as any for sellers to push for increases, especially this year with milk already very tight.
After eight weeks of steady declines since April the GDT has also turned positive, albeit not by much with the latest auction up by just 0.3%. But up is, nonetheless, up! Commodity prices on the auction convert to around 30ppl, with the (still cautious) outlook for the New Zealand season being around 28p. Now to the not so good news. Rising processor costs is starting to erode milk prices, with Arla the first to state that its September price has been undermined by “inflation across our supply chain especially on fuel, energy and packaging which has been created by the positive global economy recovery following Covid-19”. That said, its price has been unsustainably higher than its rivals for months so the 0.9p
Chris Walkland Dairy Market Analyst
The Walkland Partnership
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and Prepared by Chris Walkland Wynnstay Trading Department
February 2021
Sentiment positive, but
milk prices still slip back
board over the and are up across the to the positive sentiment the EU and UK have responded Commodity prices in middle ground liquid last four weeks. of price cuts from some to take away the risk Cream needs to get not increased enough for February or March. Alas cream prices have (Payne’s and Freshways) cut their farmgate prices players, and two have but it’s only £1.35/kg. sector, this in stability The MCVE value is towards £1.50/kg to ensure actually gettng stronger. prices very strong, and I don’t expect any is stability with cheese there since October 2018. Elsewhere, though, there margin, and it hasn’t been but before a processor over 30p after transport expect increases either. there’s therefore, but nor do I by Chinese imports. But reductions in this sector, GDT which is being fuelled the back of a buoyant on strong is Overall market sentiment and reasonable milk volumes. on milk flows. depending this, also decent demand elsewhere, on dampers that could put the ush are on the horizon Only the UK and EU fl
GB/UK milk volumes
currently flat
2020 are tracking below late first three weeks of 2021 UK milk volumes in the year, meaning volumes are below last year amounts. GB milk erence. are making up the diff Northern Ireland volumes situation. situation for the market This is a generally positive
volumes, and are within
1% of previous
0.5%
1
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