Provisional estimates of UK milk deliveries in June by the Rural Payments Agency indicate that output has stabilised in June and July after rising by over 6% on average in April and May. June deliveries fell compared with May by over 10% and were 0.7% lower than in June last year The latest figures for July show a tiny 1% drop on June to a level 1% higher than a year earlier. This stability still leaves cumulative output in the current milk quota year, which opened on 1st April some 3.7% or 153 million litres ahead of the same period last year. This excess compares with the shortfall against the annual milk quota for the year to 31st March of an estimated 73 million litres. Output must be slackened off, therefore, in the remaining eight months of the current quota year if a quota surplus and penal levies are to be avoided.
Such a slackening off may occur naturally as all the signs are that farm gate milk prices are falling rapidly. The latest DEFRA estimate of average UK milk prices in June showed a drop of 18.3% compared with June last year. This compares with a drop of 16.4% in May and 10.6% in April. This latest June average price has, for the first time, brought returns to dairy farmers below the level of two years ago. In the summer of 2000 low prices caused widespread protests from dairy farmers and then a severe cut in winter milk production. This drop brought forward offers from a number of multiple retailers to pay more for their milk provided the extra cash went back to farmers. This action helped to forestall a possible milk supply crisis at the time and some observers now believe that a new risk is emerging for the coming months, particularly as farmer's milk prices have continued to drop in July and August.