Milk prices breach 40p/litre but higher costs hit producers

Thousands of dairy producers will see a return of 40p/litre for milk this spring after a number of milk processors announced price holds and/or increases for April, May and June.

However, heavy rain and saturated fields have left a greater proportion of cows housed on full feed rations.

This has pushed up overall costs for producers, with increased feed volumes being required despite lower average feed prices.

Barbers Cheesemakers reported that almost all herds in its region in the South West had been housed earlier than usual last year and were still housed, with winter rations in full flow, and on-farm costs extremely high.

See also: Dairy markets hit a wall as Arla holds April milk price

Michael Masters, head of milk supply operations at Barbers, said: “The prospects for the forthcoming 2024 forage season are being significantly impacted. Grass is now too long for efficient grazing, too wet for silaging. It’s a challenging mix.”

He said last year’s forage stocks were diminishing fast and bare land from unplanted autumn crops remained waterlogged and devoid of thriving crops for feeding, cutting or cropping this spring.

Greater use of bought-in feed has actually helped to sustain overall milk production, with daily GB milk deliveries so far this year in line with the previous milk year, after being considerably lower during the autumn.

Milk supplies are likely to keep growing throughout April until the spring peak is reached.

Milk markets

Dairy commentators and processors have forecast a fairly stable outlook for milk markets.

Wholesale dairy values lifted by 2.8% at the latest fortnightly Global Dairy Trade (GDT) auction on 2 April, with gains for cheddar, butter, skimmed milk powder and whole milk powder.

The GDT price index averaged US$3,558/t (£2,828/t), returning to growth during March after two consecutive monthly falls.

Butter and cheese prices in the EU have also been increasing, but prices were back slightly for milk powders. Similarly in the UK, wholesale prices have been mixed.

Spot milk values have declined slightly to about 30p/litre; however, this is normal due to the levels of production at this time of year.

Several processors have been announcing prices as far ahead as June to try to offer some longer term certainty.

Freshways will increase its price in June by 2p/litre to 37p/litre for a standard liquid litre.

The processor’s managing director, Bali Nijjar, wrote to suppliers saying the decision had been made in consideration of the rising costs of production.

He also confirmed the completed acquisition of its new 400m litre site near Birmingham, first reported by Farmers Weekly in February.

Barbers has committed to a price rise of 0.51p/litre in May to 39.23p/litre and a further increase to a minimum price floor of 40.25p/litre for June, for a standard manufacturing litre.

First Milk will increase by 0.75p/litre in May to 39.5p/litre (manufacturing), including its member premium.

Mike Smith, First Milk farmer director and vice-chairman, said: “Given the ongoing wet weather and the challenge that brings to our members, I hope that this further increase in milk price will be welcomed.

“Milk markets appear to be fairly balanced at present, with demand remaining under pressure, but that is being offset by continuing challenges around global milk supplies.”

Muller, Saputo Dairy and Crediton Dairy have all committed to price holds in May.