Latest Dairy Supply Chain Margins show 'calm before the storm', but with a better outlook?

UK - While 2005 was a stable year for margins in the dairy supply chain, there were strong indications of a ‘calm before the storm’ according to Ken Boyns, Head of Economics at the MDC. But he adds that although 2006 figures are likely to be gloomy for farmers, 2007 may see some stability return to farmgate prices.
calendar icon 23 October 2006
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He was speaking as the MDC’s latest report into Dairy Supply Chain Margins was released today (23 October). The report, which provides a detailed round-up of what happened in the dairy market and margins over the past year, shows that 2005 was generally a stable year for prices.

“However, processors did experience reduced margins in the first half of 2005, and farmers suffered increased costs and reduced prices in the second half of the year as CAP reform kicked in,” says Mr Boyns.

“What is clear is that CAP reform was beginning to bite towards the end of 2005. So when we calculate the 2006 data it’s likely margins will have changed, with processors and retailers possibly doing better.”
But he adds that after price falls in 2006, farmers could well see some stability return in 2007 as commodity markets steady after CAP Reform cuts. This is of course subject to exchange rates, but farmgate prices may not be quite as volatile in 2007 compared with those of 2006.

“The period of intense change may be coming to an end in the short-term and those who are focusing on improving their farm productivity and maximising the price of their milk at the moment may start to see better returns compared to the present.”

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