March 28, 2012
UK milk prices down for the fifth month
As global supplies continue to surge, farmgate milk prices have dropped for the fifth consecutive month.
Last Thursday's monthly United Dairy Farmers' auction saw 53 million litres of milk sold at GBP0.2555 (US$0.41) per litre - a drop of GBP0.015 (US$0.02) or just over 6% on the corresponding auction in February.
According to the Ulster Farmers' Union (UFU) the price is below that required by producers to break even. United chief executive David Dobbin said the fall in prices was unsurprising given higher milk volumes on world markets.
"The fall in prices was not unexpected, with a lot more milk for sale at what was the first of this year's peak supply auctions," he said.
Dobbin said milk supplies had grown in the US, Australia, Argentina, the EU and particularly New Zealand, where excellent grazing conditions had increased production by 10% compared to last year.
The United chief pointed to recent comments about the market situation by Marina Rebello of Rabobank who said "the world is awash with milk".
"Although demand for dairy products is still good, it just can't soak up all of the extra milk being produced at present," Dobbin said.
"Surplus stocks of powder and butter are building up around the world and prices are considerably down against last year's peak level."
He said he understood farmers' disappointment at the auction result but that it reflected where the market was. The UFU said it had "deep concern" at the latest fall in prices. John Thompson described it as a "big blow" for dairy farmers in the north.
Thompson said "falling farmgate milk prices coupled with rising input prices are creating very difficult conditions for producers".
He pointed to studies which had indicated a break-even figure for dairy farmers of between GBP0.285-0.323 (US$0.45-0.51) per litre and 32.3ppl.