GLOBAL – Rock bottom milk prices, currently hurting farmers around the world, are not the sign of volatility, they are the sign of a market in crisis, the Livestock Event heard this morning.
Analysts are predicting no improvement in prices for at least six months and possibly a year and this is not in keeping with the peaks and troughs of volatility.
Agriculture specialist at Barclay’s Bank, Oliver Mcentyre, said pressure is being felt across all farm sectors but that volatility is up and down – not flat.
Discussing the impact of consumer behaviour on UK farm profit, Mr Mcentyre said the current challenge rests partly on the supply chain and how farmers increase their share of national food spend.
“For every eight pounds spent on food around one pound goes back to the farmgate,” said Mr Mcentyre. “The challenge is how you get your hands on more of the other seven pounds.”
Andersons Farm Business Consultants said it will be between six and 12 months before meaningful price increases start to take place.
Head of Business Research at Andersons, Richard King, told Livestock that he thought prices were likely to “bubble around the bottom”.
“We think it will be the back-end of this year or early 2016 before we see prices move upwards.
“Price prospects are not looking very good for the next six months if not further.”
Messages have been hard to understand for farmers since 2012, said Ian Macalpine, chairman of the Royal Association of British Dairy Farmers. He said talk of opportunity in dairying back in 2014 had been followed up with over production and a price crash.
He said: “I can accept that we will see volatility as this is the norm in a commodity market and this is driven by supply and demand.
“Normal volatility can be managed when the peaks match the troughs."
He said oversupply, Russian trade sanctions and lower demand all need addressing to tackle the downturn.
He added: “What we have currently witnessed is a peak that has exceeded 31ppl, which might be deemed as an acceptable price by the cost tracker contracts, lasting about six months with a value of possibly 4p, followed by a trough which could last well over 12 months with a price drop of 8p or more below the 31 pence per litre.
“To me this is not volatility but more a market crisis.”
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