Strong production, tested demand send milk prices crashing
Strong global milk production and rebalancing of demand among key buyers has delivered one of the biggest drops in whole milk powder prices in recent years.
In another blow to farmers last week, UK’s biggest co-op Arla announced a 3c/L drop in milk price; farmers will now receive 55c/L.
NFU dairy board chairman Rob Harrison says Arla’s decision is another body blow to dairy farmers, whose “businesses have been in utter turmoil for 12 months”.
First Milk, the only co-op 100% British owned, also reduced its price this week. From July 1, most farmers will receive 2c/L less for their milk.
Harrison says the recent cuts highlight the need for short-term solutions to address the problems happening now. Farmers need urgent help from industry and Government, he says.
“We need Government to move away from paying lipservice and to focus on the here and now. Their long-term solutions must take a back seat while we focus on the immediate crisis; we need them to insist on best practice in the supply chain, look at growing dairy consumption and support more investment in dairy processing.
“We also urgently need milk buyers to be more transparent in pricing.
“Although there are a few clear formulas employed by milk processors, these are few and far between. We need all processors to improve transparency in pricing and must stop idly following one another to the bottom. This is a dire situation and we need to see the dairy industry pull through this period of volatility.
“Government has a role here in insisting processors provide up-to-date market and production data so that the whole supply chain can better understand what’s happening and how to manage risk in the future.”
Arla blames its decision on the slump in commodity prices. Its UK head of milk and member services, Ash Amirahmadi, says commodity markets keep going down despite only a small fall in prices in the latest Global Dairy Trade auction.
“While we have taken significant mitigating actions, the impact has been felt on our traded business and more recently on European markets which are also in decline. Unfortunately, these factors are affecting the entire dairy industry and despite our efforts it has not been possible to buck the trend.”
First Milk outgoing chairman Sir Jim Paice says, “While the turnaround actions taken over the last two months have improved our trading position, we also have to factor in the impact of lower commodity prices.”
Paice, a former agriculture minister, will stay on until a new chairman is elected.
