Big Drop in UK Milk Prices Makes a Splash

UK - The average price at this month’s United Dairy Farmers milk auction was 25.10 pence per litre, which was about 0.4 pence down on last month’s auction.
calendar icon 24 October 2008
clock icon 2 minute read

Commenting on the auction David Dobbin, United’s Group Chief Executive, said “This is the smallest volume auction of the year. Milk supplies, which are generally low at this time of the year, have been further depressed by the recent exceptionally wet weather.”

“International commodity markets have fallen sharply in the past 2 months, under pressure from reduced global demand and higher supplies, particularly from New Zealand and the USA. The newly introduced Fonterra monthly auction of wholemilk powder, which started in July, appears to have driven prices lower.

In the 2 months since its introduction the average price from the auctions has fallen by 25%. The September powder auction averaged $3250/tonne, equivalent to a local farmgate price of less than 20 pence per litre. EU powder processors cannot compete at these price levels without export subsidies. Fonterra have recently reduced their forecast payout to their farmers to the equivalent of 18 pence per litre for this season’s milk.”

“The wet weather in August and early September exaggerated the normal seasonal downturn in milk supplies, both locally and in GB, leaving total UK supplies in mid September about 6% behind last year. There is no doubt that this was a positive influence in the auction, but sadly much of the speculation about GB demand for Northern Ireland milk was wildly exaggerated and totally misleading.”

A total of 33 million litres of milk were sold in the auction: 30 million litres were sold on 3-month contracts for delivery in October, November and December at an average price of 25.15 pence per litre. The other 3 million litres were sold on one month contracts for delivery in October at an average of 24.58 pence. The overall auction average was 25.10 pence, compared to 25.53 pence in last month’s auction and 33.60 pence in the auction in September last year when commodity markets were at their peak levels.

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