A number of major dairies have lowered their milk prices, but there are some signs of greater strength in the market.
Muller has announced a 0.5ppl drop in its November milk price for its direct contract, taking the price to 36.5ppl. This includes the 1ppl Muller advantage premium which is paid quarterly in arrears.
See more: Latest milk prices for dairy farmers
Meanwhile, Arla was holding its October manufacturing price for conventionally produced milk at 35.21ppl and organic at 40.88ppl, with liquid at 33.83ppl and 39.28ppl respectively. Currency exchange impacts and an adjustment to its Sustainability Incentive boost those price by 0.09ppl.
Milk prices
Arla producer and board member Arthur Fearnall said: “It is positive to see that, for the first time this year, our branded retail sales have picked up.
“Global commodity markets are pressured by whole milk powder, while European markets are more stable, albeit slightly negative. However, there is some degree of uncertainty driven by commodity market developments.”
Freshways has reduced its November price by 1ppl to 35ppl.
Managing director Bali Niljar said: “While we have been successful in convincing customers to remain loyal, the mounting pressure from falling prices in other sectors has made it difficult for Freshways to justify paying above market indicators.”
He added the investment in a new distribution hub for London and the South-west and a 250 million litre processing plant in the Midlands demonstrated the company’s commitment to producers.
See also: Dairy farmers fear financial losses
First Milk dropped its November price by 0.85ppl to 36ppl on its standard manufacturing contract which includes a member premium.
Vice chairman Robert Craig said: “We understand that this will be unwelcome news for our members, especially heading into the winter, as costs on farm remain stubbornly high.”
He added dairy demand had been reduced for several months, pressuring prices, which had impacted returns.
Using the Arla October conventional manufacturing price as a guide, values are 31 per cent lower than a year ago, but still 2.59ppl or eight per cent higher than in October 2021.
Lower prices have not led to a slowdown in production yet, but output in the second half of the 2023/24 milk year is expected to fall. There were 1.194 billion litres of milk delivered to UK dairies in August, according to Defra, one per cent more than in the same month last year. Deliveries in the 12 months to the end of August was also up one per cent on the previous year at 14.945bn litres.
Looking to the future, Susie Stannard, lead analyst at the AHDB said with a much lower price and ‘eye-wateringly expensive input costs’ many farmers could face a winter cashflow crisis.
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“There will be little incentive for farmers to push cows and herd reductions could be made to boost cashflows later in the autumn and into the winter.”
Robert Speck, Kivells auctioneer said they had not yet seen a big increase in the number of dispersal sales but it could change later in the season when cashflows have tightened.
He added plenty of forage was keeping some costs down.
“What we are seeing is a lot of youngstock that is more difficult to sell,” he said.
AHDB expected GB milk production to fall quite significantly over the next year, with September 2023 to March 2024 output down 5.6 per cent to 6.710bn litres – these figures do not include Northern Irish, which the Defra ones do. This would result in a 0.5 per cent decline in output during the April 2023 to March 2024 milk year. The AHDB also predicts a 0.4 per cent decline in April to August 2024 deliveries.
Wholesale market
There has been some better news on the wholesale market. September butter and skimmed milk prices were one per cent more than the month before, according to AHDB, although values were still about 40 per cent less than in September 2022 when they were near their all-time peak.
Bulk cream prices rose two per cent in September, although they were still 42 per cent lower than September 2022. Meanwhile, cheddar prices slipped two per cent in the month and were a third lower than in September 2022.
This week’s Global Dairy Trade auction rose by 4.4 per cent, the third increase in a row. Milk powder prices rose, but there was a small drop in cheddar prices.
