The latest Defra survey of UK milk prices shows that the average July farmgate level of 18.3p per litre was still, as in previous months, about 1p per litre higher than a year earlier.

However, this higher level may not last for much longer. Last year, farmgate prices continued to rise in the autumn to a peak of nearly 20p per litre by November, but a repeat of this rise seems increasingly unlikely in 2004.

Processors are aware that butter, cheese and milk powder prices could fall by the end of the year and will be anxious to see this reflected in milk costs.