May 13, 2022


UK milk prices steadily increasing since mid-2021



UK milk prices have been steadily increasing since mid-2021 in line with better market returns, but the high prices are also intended to slow down declining milk output in the country, the UK Agriculture and Horticulture Development Board reported.


The Milk to Feed Price Ratio (MFPR) is low but relatively stable at 1.15-1.26. In the past, an MFPR of 1.16-1.30 shows stable milk output, and when it surpasses 1.30 there is a rise in milk production. When the MFPR falls below 1.15, there are periods of declining output.


MFPR is a widely used metric of farm profitability that also serves as a signal for milk production outlook.


Milk output in the UK has been on the decline since July 2021 because of pressures on margins as the result of rising input costs and worker shortage.


Many UK farmers are also expected to have concentrate costs that are greater than the stated average, particularly those who did not acquire supply at the cheaper prices available earlier in 2021.


Estimated dairy concentrate costs have risen significantly in March and April, and this is starting to push the MFPR lower, despite increased milk prices at that period.


To maintain the April MFPR of 1.19, the GB milk price would need to be in the range of 44ppl on average, assuming a 15% rise on the predicted April concentrate cost of GBP 318 (~US$388.82; GBP 1 = US$1.22) per tonne, which is expected to affect farmers later in the year as feed purchases increase.


Given the increased cost challenges faced by dairy farms this year, and to overcome worries about labour shortages and the impact of lower BPS payments, an even higher price would be required to spur development.


With global feed components markets expected to be very unpredictable through 2022, and perhaps into 2023, it will be critical that milk prices stay at a level that supports cash flows and farm confidence.


-      UK Agriculture and Horticulture Development Board

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