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Global dairy market steady as Fonterra announces 4% milk price rise

Although September 2019 UK milk production was only 0.3 per cent greater than the same month last year, annual output is still at more than 30-year highs. Deliveries in the year to September are up 16 per cent since the beginning of the decade, according to Defra figures.

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Global dairy market steady as Fonterra announces 4% milk price rise

In that time liquid milk processing has dropped 5 per cent. Milk used for manufacturing products such as cheese and butter has increased by a third, while exports have doubled.

 

This still leaves the UK with too much milk which is putting pressure on prices.

 

Global milk supplies have remained static in 2019, according to AHDB.

 

Announcements

 

Supply increases of less than 0.5 per cent in the EU and USA are expected for the year, while output growth in New Zealand and Argentina is balanced by a fall in Australian production.

 

In the latest round of announcements prices have been largely held, with dairy industry commentator and Dairy Farmer columnist Ian Potter reporting December price hold for Glanbia (Cheese), Barbers, Wyke Farms, Belton Farms and Crediton Dairy.

 

Analysis by the Dutch farmers organisation LTO shows an average September EU milk price of €33.60/100kg (£28.81/100g), with Saputo UK (Dairy Crest) at a similar value.

 

German, Danish and Irish prices are below the average.

 

The average compares to €34.70/100kg (£29.76/100g) a year ago.


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Other analysis by AHDB shows the UK price per kilo of milk solids has been about £0.20/kg below the average EU price over the last 12 months at £4.20/kg.

 

The LTO Fonterra New Zealand price in September was €29.36/100kg (£25.18/100g) and the average US price was €41.74/100kg (£34.79/100g).

 

Fonterra has recently announced a 4 per cent increase in its milk price.

 

Global dairy trade auctions have shown some signs of life in the last week or two, with a 4 per cent increase in the average November 5 price, compared to the week before.

 

Skimmed milk powder prices were up 7 per cent on the week.

 

Processors

 

AHDB calculates returns for processors making butter and skimmed milk powder exceeded those for mild cheddar in October for the first time in 18 months. Actual Milk Price Equivalent (AMPE) is up about 3ppl in the month to 31ppl.

 

AMPE is an indicator of the processor price for milk used in butter and cheese processing.

 

British producers will hope that the tighter global market will manifest itself in higher prices soon but with a reliance on domestic liquid milk sales, national oversupply might continue to keep prices in check.

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