February 7, 2011

Dairy Group sees steady milk price hike

The Dairy Group is forecasting a more gradual and sustained price hike for this year than in 2007 as average milk production cost in the year to March 2011 will reach 30p/litre.

At that time, higher milk prices triggered production increases and prices collapsed again. The price rise so far this year of around 1p/litre has not made up for production cost increases but markets are set firm for the early part of the year, says the Dairy Group.

Its milk price equivalent, calculated from weighted actual wholesale prices for liquid milk, cheese, butter and powders after processing costs, reflects likely market returns to producers. This now stands at 27.62p/litre and recent auctions in Northern Ireland saw processors paying more than 29p/litre for one month milk supply contracts.

The next price rises need to come quickly for many producers who are weighing up whether they can stay in milk long enough to reap the benefit of any longer term improvements on the back of higher world demand for food.