The outlook for this year’s UK milk production is far more positive for supply - and potentially for wholesale prices too.

In the 2012/2013 milk year, milk volumes were at their lowest for three years, as production fell 3.9% to 13 billion litres [DairyCo], after poor weather devastated the quality and quantity of forage crops used for feed and limited opportunities for cows to graze.

However, this year’s improved weather has been more conducive to milk production, resulting in a 123 million litre increase in milk volumes for the 2013/2014 milk year to the end of October. Monthly milk flow has seen sustained year-on-year growth now since July, and last month, UK milk volumes were 9.7% higher than in October last year and at their highest levels in any October for at least five years. This has coincided with an in increase in butter production - up 17.7% last September compared with the same month last year - as well as cheese (up by 6.4%).

However, any impact increased production might have on wholesale UK dairy commodity prices must take account of farmgate milk prices. In September, average UK farmgate prices stood at 32.95 pence per litre - 19.8% higher than in September last year.

But there are signs farmgate milk prices are coming down. Sainsbury’s has announced it will reduce the farmgate milk price it pays to its farmers who make up the Sainsbury’s Dairy Development Group (SDDG).

From 1 January next year, SDDG farmers - whose milk price is calculated based in part on the price of feed, fuel and fertiliser - will have their milk price reduced by 0.43ppl due to a fall in feed costs in the three months to October.

Prices for farmers signed up to Dairy Crest’s formula-based price contract will also see their farmgate price reduce by 0.254ppl for December.

Typhoon Haiyan forces coconut oil prices to rocket

Coconut oil prices have rocketed by 26% month on month in the aftermath of Typhoon Haiyan, which has devastated the Philippines. Market concern over the short and medium term availability of the commodity pushed prices up to £771.1/t - up 43% on this time last year.

The typhoon has also had an impact on the price of palm kernel oil. It has shot up to £689.6/t - 32% more expensive than last year, and a 21.8% increase month on month.

Prices 30 Nov 2013

Meanwhile, robusta coffee has eased to £929.3/t, down 23.2% on last year’s prices, and 8.1% month on month, driven by good supply on the back of higher than expected volumes of the crop in Vietnam, the world’s largest producer of robusta coffee.

Prices digest

Potatoes: Production of the 2013 Great Britain potato crop is estimated to be 5.46 million tonnes, up 21% on 2012 but still the second-lowest since 2007 [AHDB]. The increase has been driven by yields, also estimated to be up 21% on 2012.

Palm oil: Prices have risen following predictions of increased demand and concerns the monsoon season could affect production in Malaysia and Indonesia. This has narrowed the gap between palm and other vegetable oils, and taken the price above crude oil.

Lemons: Exports from South Africa were at near-record levels this year despite restriction on supply to Europe because of concerns over black spot disease, the Citrus Growers’ Association of Southern Africa has reported.

Bioplastics: Nestlé is to work with the World Wildlife Fund and seven other fmcg businesses to encourage responsible development of bioplastics derived from agricultural materials such as sugar cane and corn.