The dairy industry could be facing a double blow, with rising currency rates and a potential fall in prices. The rising value of sterling has meant the intervention price for butter has fallen 5% since the start of the year to just under £1,990/tonne. This means the intervention value of milk is back to the same level it was in late February last year.

The currency shift also puts at risk the rise in the average farm gate milk price, up 2ppl over the 12 months from its February 2003 level of 17.7ppl. This raises the possibility milk prices will start falling this spring before intervention prices are cut a further 6% on July 1 as part of CAP reform.