Increased stability in global dairy commodity markets point to an end to the spate of recent farmgate milk price cuts, analysts have suggested.
Arla recently announced a cut of 2.16p per litre to its March milk price to 27.11ppl, representing a reduction of more than 5ppl since December, as it cited “dramatic falls in the commodity markets from the highs of last autumn”. Müller, Dairy Crest, Freshways, Glanbia and Crediton have all made further reductions to their prices of more than 1ppl in recent weeks for similar reasons.
The UK ‘all milk’ average price for January fell by 3.2% from December to 30.60ppl [Defra/AHDB]. Actual averages could now be much lower, according to Promar head of data Tim Harper, due to the time lag between price cuts and the reporting of averages.
But there are no indications prices could fall to dairy crisis levels, which dropped as low as 19.95ppl in June 2016, with Harper adding it seemed “likely” they would level out around 27-28ppl by June.
His comments echo those of AHDB Dairy last week, which said farm prices “may settle or even move up again after the spring flush”, though the deciding factor would be determined by how wholesale markets held up through the flush.
A “dramatic” supply scenario in New Zealand has fuelled global commodity volatility, adds Harper. Rising production in the US and Australia has also contributed, alongside the significant rises and then falls in EU butter prices - which hit record levels of €7,000/tonne in September before falling to €4,000/tonne in January.
But further price cuts “seem unlikely in the next few months”, says Harper. “Milk buyers have probably made most of their announcements regarding price falls, so we shouldn’t see many more unless conditions change again.”