Encouraging signs for farmgate milk prices

By Patty Clayton

Market returns for key dairy commodities continued their upward path in September, providing positive signs for market-based farmgate prices for the remainder of the calendar year.

Both AMPE and MCVE saw increases in the month following upward moves in butter, skim milk powder and mild Cheddar prices on wholesale markets. Limited growth in milk production, both in the UK and EU, combined with the gradual improvement in foodservice demand provided the boost to markets.

The net impact of these moves was a 3% (1.1ppl) increase in the average market value for a litre of milk between August and September. Accounting for the lag in passing through improved returns to the milk price, this suggests some upward potential in milk prices through the winter.

The market movements should help offset some of the additional costs being felt on farm. However, there is the risk that these increases will be constrained by input cost inflation elsewhere in the supply chain. Labour shortages and energy price hikes are having impacts across the economy, putting pressure on manufacturer’s margins, particularly if price increases cannot be passed through to customers.

Sign up to receive the latest information from AHDB.