UK milk markets start to respond positively
ACCORDING to DairyCo all of the main milk buyers in GB have reversed their previously announced intentions to introduce producer price cuts in August. The reality is that both retailers and processors have reacted to pressure from the industry.
Meanwhile, UK wholesale dairy prices saw little movement in July, with the market extremely quiet due to the summer holidays. Prices for SMP, Mild and Mature Cheddar are all unchanged in July. There has been a slight adjustment in the prices of butter and cream compared with June. This follows the holidays and wet weather impacting domestic trade and sterling strengthening against the euro meaning that those looking to export have found markets very challenging. As a result, butter was £25/tonne lower than in June at £2,250/tonne and cream was £20/tonne lower at £1,000/tonne.
The changes to the UK market price for butter meant that the Actual Milk Price Equivalent (AMPE) decreased by 0.1ppl (0.4%) compared with June, to 23.4ppl in July.
Cream income to a liquid processor decreased by 0.12ppl (2.0%) compared with June, to 5.83ppl in July. These price changes are expected to be fairly short term, particularly with regards to cream. There could easily be some pick up in domestic trade if the recent good weather continues as well as on account of the Olympics.
Despite the dry weather seen for much of GB in late July, milk deliveries continue to fall below the previous year. UK daily deliveries for the two weeks ending 21/07/12 averaged 35.8m litres/day, 1.7m litres/day (-4.5%) lower than the same period last year.
Looking forward, while farmers may be able to catch up with silage making, there will be questions regarding its quality. Data from Defra suggests that additional feed is already being used. In May 2012, GB production of cattle and calf feed was 23% higher than May 2011.
This year’s Royal Welsh Show saw representatives from the farming unions and Dairy UK, together with farming minister Jim Paice MP, agree the principles of the voluntary code of practice for milk contracts. This will offer a framework as to how contracts will be agreed and managed between farmers and processors. While this is a headline agreement and there is much more detail to be agreed on, there are several points of interest. Firstly, farmers will have the right to resign from a contract with three months notice following an unacceptable price change.
There is also the right of the producer to receive 30 days notice of any price change. The final point of interest is the right for non-exclusivity. This means that if a farmer wished to expand production beyond the amount agreed with a milk buyer, the farmer would be free to sell the additional milk on elsewhere.
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Wednesday 22 May 2013
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