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Dairy 'roller coaster' set for turnaround

There were further signals of a turnaround in the dairy industry this week.

 



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UK milk production fell to a deficit of four million litres a day average and there were further positive moves from processors. Daily production is now below the three-year average and tightening supplies have led to price increases.


Sale rings also saw an increase in dairy cow prices as farmers reacted to the shortage by buying cattle.


It came as First Milk followed Meadow Foods and Glanbia in announcing increases to its prices for July.

 

Current positivity


While First Milk chairman Clive Sharpe said the increases ’were not market related’ he stated the current positivity in the market ’bodes well for future milk price moves’.


However, Arla’s pricing mechanism and the current weak pound, could put pressure on prices.


As an European co-operative, Arla takes into account the average exchange rate in its prices.


Although the processor has held its prices for July, the average quarter price for April to June meant producers saw a 0.07ppl reduction.


As Arla is a market leader in the UK there is a risk other processors will delay their increases, market analysts said.


Dairy Crest also held its prices.

 

Demand


In the past month, demand for cream and butter has driven prices forward with the average price for cream up £240 per tonne to £1,100, butter up £325p/t to £2,350 and cheese up £250p/t to £2,000.


NFU dairy board chairman Michael Oakes said farmers were still not seeing full returns.


"With the cream prices rising, we should be seeing milk prices improve across the board and in that respect it was disappointing to see Muller hold the milk price for August," said Mr Oakes.


"There are clearly delays which just do not make sense."


Graeme Kilpatrick, NFU Scotland’s milk committee chairman, had likened the situation to a roller coaster.


"If you are going up so fast, you do not want to come down just as fast on the other side," he said.


"I would rather see a more stabilised market."


Last week Tesco unveiled a new Fair For Farmers guarantee on all its fresh milk.


The move guarantees each farmer supplier ’is paid fairly for every pint of milk, every pint is 100 per cent British and every cow is well cared for’.

 


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