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That growing optimism built up over four consecutive gains on the GDT auction has been soundly shattered by the last three trades which have all recorded losses.
With Christmas only weeks away, most traders will have done their Q4 deals which means there is virtually no chance of milk prices increasing this winter – unless, that is, more retailers step up to the plate.
Indeed, Farmers For Action is out again putting pressure on to achieve just that. The trouble is the big retailers are starting to find the going tough, as for the first time the two discounters Aldi and Lidl seize a 10% market share.
Even those fortunate Tesco suppliers will face a scale back on their premium volume, and other groups could be set to follow. There’s simply too much milk about and buyers know it.
Domestic production is riding high because of the open season, and this understandably has been exploited to produce more litres, paradoxically to counter low prices. However, with cows now being housed, that driver will largely be removed and expose those teeteringly thin margins.
Couple that with talk of banks refusing to extend help to troubled businesses and it is expected far more farmers will quit this winter than the 4% annual average. The RABDF’s latest survey shows a frighteningly high 49% if prices don’t improve for the next six months. Aside from those who decide to quit, the naked economics of winter milk might just curb production.
It might be that volumes tighten quicker than anyone expects, and the domestic market, if not the global one, picks up faster than is forecast. Let’s hope so!
Peter Hollinshead, Dairy Farmer editor