July 14, 2022

Review of UK dairy market in June

May saw the highest volume of milk deliveries in the UK, totaling 1,139 million litres, 1.5% less than May 2021. The production in June, at 1,045 million litres, was down 2.1% compared to the same month the previous year, the UK Agriculture and Horticulture Development Board (AHDB) reported.

The lower yields have been taken into account in the AHDB's most recent forecast, which now projects production for the 2022–23 growing season at 12.23 billion litres, or 1.0% less than in 2021/22. Farm budgets are still being severely impacted by high input costs, and despite rising milk prices, production is declining year over year.

Milk output also remained low, with May deliveries expected to be down 1.8% compared to the same month last year. Except for Argentina, deliveries in May decreased compared to the previous year. Although deliveries in 2021 were comparably high, the EU experienced the largest deficit.

As production reached its peak and began to decline seasonally in June, wholesale prices increased once more. Prices were higher overall than in May, with cream seeing the biggest monthly increase because of its more limited supply.

The average milk market value (MMV) increased by 1.03ppl in June as a result of both market indicators moving up by 2%. Farmgate milk prices are still supported by wholesale market stability, but higher processing costs are also reducing processors' profits. These have now been added to our market indicators to account for inflation in the first quarter of 2022.

Farmgate prices in the UK have increased significantly so far in 2022, rising by an average of more than 12ppl. With additional price increases still to be implemented for June and July, the average price for all milk in the UK in May was 39.8ppl.

But recent data on agricultural inputs reveals that there hasn't been any "net" benefit to farm finances from the higher prices, as they have risen at roughly the same rate as agricultural input costs so far in 2022. There is little incentive to push for higher yields because many farmers are probably still trying to fully recover from the relatively large cost increase from late last year, when milk price increases were lagging.

-      UK Agriculture and Horticulture Development Board