MILK MARKET UPDATE This time of year is not normally a good time for milk price rises. In fact, history shows that there were no sizeable price increases (i.e 1ppl or more) at all between March and May in 2016, 2017, 2018 and 2019. More recent years have been more productive - there were six price rises in 2020, and five in 2021. But this year has outshone them all, happily, with 57 price rises already for the period! There are also six announced for June.
price increases. But I can’t see that happening now – least of all with the current dry weather. We haven’t had any decent rain that I know of in April at all. The ground is very dry, and this does not bode well for the forage season. And all of that is before the cost of fertiliser is factored in. In addition, the Milk Price: Feed Price Ratio is still well below the threshold at which farmers feed extra cake for extra milk. Then there’s the talk of livestock marts being pretty full of cattle, and farmers dropping cow numbers because of labour issues. It all means the pressure will be on volumes throughout this year. Elsewhere, milk volumes are still low, although the EU for February was up slightly.
So, what prices might you expect going forward? This isn’t the six-million-dollar question, but is it the 50ppl? That’s not looking likely at the moment, I don’t think – certainly not in the short-term. 45p is looking likely, with Freshways aiming for 45p for July, while stating 44p is currently guaranteed. Others are also going to be there or thereabouts. But 50p? That looks like a step too far, but I guess we shouldn’t rule anything out in this crazy world!
If we look at the forward prices from the futures or the GDT we can see that prices are returning around 45p now, and there is nothing that is pointing to 50p at the moment. Will prices get to that magic number? They might. Just not yet I don’t think. Much will be down to volumes after June and your cost of production. So even if it does you might not be much better off!
But the facts are that commodity markets are dipping from their tops, and the higher prices go, the more of a glass ceiling comes into play where buyers (i.e the customers of the processors, not the milk processors themselves) do not see why farmers should get more than a certain level. At least that was my perception. Happily, though, the 40p glass ceiling has been totally shattered – not least because farm costs are at, or very near, to the prices being paid! I also thought May and June would see the pace and amount of milk price increases slow, and I think if Arla was not recruiting then we would have done. But it’s monster May increase, twinned with recruitment, means other processors have to follow. The main reason for the lack of price rises at this time of year, and my view they would slow this year, relates to the flush. Processors and customers of the processors believe that the flush will see plenty more milk coming in which will mitigate
Chris Walkland Dairy Market Analyst
The Walkland Partnership
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February 2021
board over the sentiment and are up across the UK have responded to the positive Commodity prices in the EU and last four weeks. liquid price cuts from some middle ground enough to take away the risk of Cream needs to get March. or February Alas cream prices have not increased for prices (Payne’s and Freshways) players, and two have cut their farmgate in this sector, but it’s only £1.35/kg. is towards £1.50/kg to ensure stability gettng stronger. The MCVE value actually and strong, very with cheese prices don’t expect any Elsewhere, though, there is stability been there since October 2018. I a processor margin, and it hasn’t over 30p after transport but before but nor do I expect increases either. reductions in this sector, therefore, fuelled by Chinese imports. But there’s back of a buoyant GDT which is being the on strong is sentiment Overall market and reasonable milk volumes. also decent demand elsewhere, on this, depending on milk flows. the horizon that could put the dampers Only the UK and EU flush are on
Working in collaboration with Chris Walkland, a specialist Dairy Market Analyst, our dairy and feeds market update looks at the latest pricing trends and offers analysis on how these have been influenced.
GB/UK milk volumes currently
flat
late 2020 volumes, weeks of 2021 are tracking below UK milk volumes in the first three are below last year, meaning year amounts. GB milk volumes up the difference. Northern Ireland volumes are making situation. market for the This is a generally positive situation
and are within 1% of previous
0.5%
1
5
WYNNSTAY DAIRY NEWSLETTER
MILK MARKET UPDATE
still slip back Sentiment positive, but milk prices
