Crisis-hit dairy farmers could soon be in clover, as bulk cream prices - recently blamed by processors for planned milk price cuts - look set to rise off the back of a predicted global milk shortfall.
At £1.10/kg, UK wholesale prices for bulk cream are 31% lower than a year ago. The price of butter had also plummeted to £2,350/tonne [Kite Consulting].
But “the surplus of milk that caused milk prices to come down fast throughout northern Europe last year has now gone,” said Promar diary analyst Derek Gardner.
And with adverse weather conditions in key dairy exporting countries - including the USA - the worsening decline in milk production would have to be addressed, said Kite Consulting partner John Allen.
“Bulk cream and butter prices are likely to return to at least the same levels as last year’s previous peaks in late June - at over £1.80/kg, and mid July at £3,000/tonne [respectively] - as early as the new year.
“Those peaks were when feed prices and production costs were 25% lower, so our estimates are conservative,” Allen added.
And DairyCo analyst Matt Johnson said “the tightening milk supply situation is currently a contributing factor helping to stabilise global wholesale prices, which in turn could help UK wholesale prices [to rise] into the winter.”
An increase in the price of cream would be welcome news to farmers, as milk processors cited changes in bulk cream prices for corresponding increases or decreases in the milk price they pay.
ADAS senior business consultant Tony Turner said: “Wholesale prices are going to go up and will potentially help support UK milk prices, because processors will make more money.”
A high-profile campaign by dairy farmers highlighting the rising oil and feed prices, and the 5ppl gap between the cost of production and the prices they received, saw processors announce a dramatic u-turn on plans to lower farmgate prices from 1 August.
And leading multiple retailers Asda, Morrisons, The Co-op, Aldi and Lidl also announced extraordinary payments of up to 4ppl.