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Milk prices plunge amid massive market turmoil

A massive over-supply of milk in the UK and across the world is the reason for the dramatic fall in milk prices.

UK spot markets have dropped to 15ppl, while some milk is going unsold and starting to be dumped.

The global market has been sideswiped by the Covid-19 lockdown, especially the disappearance in foodservice and institutional demand including canteens and school kitchens.

 

Since the highs of January milk prices on the Chicago futures exchange have dropped by a quarter, cheese down by 24 per cent, milk powder is 31 per cent lower and butter is down a third.

 

Meanwhile, the European Commission reported a 14 per cent drop in the Italian milk market it monitors during March. The decline in global dairy prices accelerated from the middle of March onwards as countries shutdown restaurants and locked down its citizens.

 

“The panic buying of dairy products with retailers restricting milk purchases has reversed as demand plummeted,” said milk market watcher and Dairy Farmer columnist Ian Potter.

 

“To compound matters, the food service, restaurants, pubs, hospitality businesses have been rushing to offload unwanted stock and cancelling orders.”

 

He said that this is already leading to some dairies saying that they cannot guarantee that they can collect milk from farms.

 

Dairy’s vulnerability

 

The limited shelf-life and need for chilling means that milk and dairy products are very vulnerable to sudden changes in the market.

 

Liquid milk needs to be consumed or processed within days of production and limited cold-storage facilities mean that stocks soon build to capacity.

 

The UK may be a little more shielded than other countries because of its large consumption of liquid milk, mainly bought in supermarkets.


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In other countries, such as the US, where foodservice accounts for 55 per cent of food spend, the closure of restaurants is an even bigger blow.

 

Because the crisis is an international one, the dairy export trade has also been severely hit with lower foodservice demand compounded by disruption to shipping.

 

Muller

 

In the UK, the crisis has hit dairies who supply non major retail customers the hardest. Muller actually announced an increase in milk prices last week from May.

 

So far, most cheese processors have held prices, but there have been drops of at least 2ppl from dairies such as Pattemores and Freshways who have a large number of non-retail liquid clients.

 

Meanwhile, Wells Farm Dairy in Staffordshire has put its farmers on notice that its pricing will be on constant review. It is almost inevitable that the next round of price changes will see farmgate prices drop, perhaps significantly in some cases.

 

 

Changes in milk prices

Dairy

Market

Change

From/to

New Standard price

Muller Direct

Liquid

Up 1ppl

From 1 May

27.25ppl with conditions, 26.25ppl standard

Arla member

Manufacturing

Hold

From 1 April

30.79ppl

Saputo

Manufacturing

Hold

To 1 July

28.7ppl

Barbers

Cheese

Hold

To 1 June

27.79ppl

Wensleydale Creamery

Manufacturing

Hold

To 1 May

27.75ppl

Lactalis

Manufacturing

Hold

To 1 July

27.61ppl

Crediton Dairy

Liquid

Hold

From 1 May

27.5ppl

S. Caernarfon Creameries

Cheese

Hold

To 1 June

27.28ppl

Glanbia

Cheese

Hold

To 1 May

27ppl

First Milk

Cheese

Hold

To 1 June

26.63ppl

Pensworth Dairy

Liquid

Hold

To 1 May

25ppl with welfare conditions, 24.5ppl without

Pattemores

Liquid

Down 2.25ppl

From May

24ppl

Paynes Dairies

Liquid

Down 0.5ppl

From 1 April

25.7ppl

Meadow Foods

Liquid

Down 2ppl

From 1 April

24-26ppl depending on supplying group

Freshways

Liquid

Down 2ppl

From 29 March

24ppl

Dairy Partners

Cheese

Down 2ppl

From 1 April

Unknown

Wells Farm Dairy

Liquid

Under constant review

Source: Ian Potter Associates www.ipaquotas.com

 

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