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How are UK wholesale prices comparing to the EU?
Thursday, 14 October 2021
By Kat Jack
Gaps that had formed between some EU and UK dairy commodity prices have started to converge again. For butter, the premium EU product was holding over the summer has narrowed considerably in the last two months (August and September), while for skimmed milk powder (SMP) the UK lost its premium position and then regained it.
Over the last two years (Sep-19 to Sep-21), EU and UK butter prices had been tracking each other closely in sterling terms. However, in May 2021, EU pricing jumped ahead, and between May and July held an average premium of £176/tonne over the UK price. This gap halved in August, and stayed steady in September as prices rose in both regions.
EU and UK SMP prices have tracked even more closely than butter prices, in sterling terms. Although a similar pricing gap opened up in the early summer, this peaked at a £66/tonne premium for EU product in June. By August, this gap had closed to just £6/tonne – although it widened again to £25/tonne in September.
When the EU exit transition period ended at the start of 2021, there were concerns that the new trade regulations could force UK product into a discount compared to the EU, to account for added costs and rules. On this surface level of overall averages, that does not seem to have transpired. However, extra costs and the ‘hassle factor’ are likely still impacting individual businesses behind the scenes, which could be affecting margins.
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