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'Smoke and mirrors' keeps milk price low

Milk price increases to 30ppl are ’two months too late’ with experts suggesting prices had not hit these highs due to lack of bargaining power.



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The pound strengthening against the euro has affected dairy market prices
The pound strengthening against the euro has affected dairy market prices
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'Smoke and mirrors' keeps milk price low

Lack of transparency in the dairy supply chain is keeping milk prices low, according to NFU Scotland milk committee chairman Graeme Kilpatrick.

 

There has been a lag on market price increases reaching the farmgate and United Farmers for Real Action said it was considering protests if the price did not reach 30ppl soon.

 

But Mr Kilpatrick said it had not reached this level because the primary producer did not have enough bargaining power.

 

He said: “It is a historic problem. The processor blames the retailer and the retailer blames the processor.

 

“This smoke and mirrors is going to have to stop. Every time new contracts come out, producers’ bargaining power gets further eroded.”

 

Time lag

Mr Kilpatrick warned processors that farmers would be expecting the same time lag when the market changed again.

 

Dairy analyst Chris Walkland said the 30ppl level was being hit by an increasing number of processors, but it was two months too late.

 

The pound strengthening against the euro has also affected market prices.

 

Mr Walkland said this would have tempered actual milk price equivalent (AMPE) prices by 2ppl.

 

He said: “It should be 30ppl now with sterling at the level it was in early to mid-November. Now it should probably 28-29ppl.”

 

Arla’s price has been affected by its currency smoothing mechanism and Mr Kilpatrick said this was affecting other processors’ prices, as they said they needed to remain competitive.

 

He said: “As far as I am concerned, it should not be an excuse for other companies.”

 

Mr Kilpatrick said there was no incentive to produce more milk and there was going to be a shortage of cream, butter and cheese.

 

Analysis from AHDB claimed there would be enough cream for Christmas, but ‘it will rely on fat being diverted from butter manufacturing to cream manufacturing’.

 

Announcements

Dairy Crest announced last week its milk price would reach 30ppl in February. Arla raised its milk price to owners to 24.63ppl in December and Muller’s January price was announced at 25.44ppl, plus the retailer supplement.

 

Mr Walkland encouraged producers to ‘focus on the fact the market is moving in the right direction’.

 

“There should be decent returns next year,” he said. “There has to be.”


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