Q and A: Dairy wholesale prices

How are AHDB’s published dairy wholesale prices put together? 

The UK dairy wholesale prices survey, compiled by AHDB, is an anonymous monthly survey conducted to get indicative prices for the spot trade of a variety of dairy commodity products:

• Butter (Unsalted)
• SMP
• Bulk Cream
• Mild Cheddar

The survey results are based on the views of a panel which represents different parts of the dairy wholesale industry. The panel used includes buyers, sellers and traders of dairy products. 

The prices which are collected, checked, and then published are based on conversations with the panel (apart from bulk cream).  Bulk cream prices and volumes sold are entered into a portal which allows us to produce a weighted average. This is unique in the market.

How are the prices used?

UK dairy wholesale prices provide an indication to market movements.  Once completed, these are published on the AHDB website. In addition, the prices collected form the basis for market indicators that are published on the AHDB website. These are:

• AMPE – Actual Milk Price Equivalent (returns from Butter and SMP markets)
• MCVE – Milk for Cheese Value Equivalent (returns from mild Cheddar and by-products)
• Cream Income to a liquid processor (theoretical returns of cream)

As this is a survey of spot trade, prices collected will only be representative for this portion of the industry. Many dairy products are traded under fixed contracts agreed in advance.  These are subject to commercial sensitivity and hence the price is not known.

When are the prices published?

The dairy wholesale survey is published monthly on, or as close to, the 25^th as possible (dependent on weekends, bank holidays etc). Views on prices will cover the whole of the specified period i.e. beginning from the first day after the end of the preceding period.  In this way 100% of the month (and year) will be covered by the prices captured.

Why isn’t the survey done on a calendar month basis? 

The prices published are not an average for the whole calendar month. This is because  the industry expressed a preference for a publication date of 25^th, to feed into contractual discussions, Instead the survey covers the preceding 4 or 5 weeks to the publication date, as outlined in the schedule. The survey timings mean that prices are captured which cover all 52 weeks in the year, so the survey will not inadvertently miss peaks and troughs in the market.

Why are AHDB prices different to other sources?

There are several other data sources for UK dairy wholesale prices including Milkprices.com and the PTF reports. AHDB routinely validate our prices versus these other sources.  However, at certain times there will be variance.  This does not mean our prices or the other prices are “wrong”, rather there are differences in methodology that will yield different results. 

For example, AHDB’s cream survey captures volumes as well as average price paid which means the data is weighted to more accurately reflect the market.  AHDB also cover the whole of the year rather than a snapshot of specific weeks in the month. This means that our peaks may not look quite as high, nor will our troughs look as low as some other sources.  The underlying trend, however, is always the same, even if the price varies by a few pounds per tonne.

AHDB also validate the information we receive from our contributors. In the case of cream, this takes the form of audits, to check whether a company’s trades match the information they provided to the survey. For all commodities we compare information provided across the panel and will challenge any information provided which does not match the broader trends across the contributors.

Where can I go for further information?

Further information about the survey methodology and product specifications can be found on the dairy wholesale survey webpage.

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