Virtually all milk processors in the UK have already significantly reduced the fee for the milk for this or next month, sometimes by 5 cents per liter. ” Sentiment in the global dairy markets has been weakening for some time but has been accelerating significantly since early January, with almost weekly reductions in dairy prices, ” said Robert Craig, director and vice-chairman of First Milk, the UK’s only major dairy cooperative.
First Milk has reduced the milk allowance for February at once by 4 pence to 45.69 Pence, currently 51 cents, per liter. That price includes a membership fee and bonuses afterwards. Craig: “we are probably experiencing the biggest gap between the milk price for the farmer and the dairy quotations at the moment. Fortunately, we have been able to maintain the milk price so far and provide stability throughout the winter, but we are not immune to market forces and have to adjust our price to reflect market movements.”
The milk price has also been reduced for the other larger players. At Mllerller, it is 3 pence per liter to 49.5 cents, while market leader Arla has made a reduction of 2.65 pence to the even higher level of 54.5 cents per liter for conventional milk as of February 1. Head of Agricultural Affairs Richard Collins Van Mllerller, the British subsidiary of the German food group of the same name, states ‘that the milk price has gone through a period of unprecedented increases which now almost inevitably follows a correction’.
Price cuts don’t come as a surprise
The price cuts come as a shock but not really as a surprise. Ian Potter, one of the UK’s leading dairy experts, warned a few weeks ago of a drastic decline ‘that will probably be even sharper than many think’. Also chairman Gary Mitchell of the dairy section at boerenbond NFU Scotland states ‘ that we know that the market has to adapt. ‘It has been an extraordinary year with high yields, which has also given farmers the opportunity to invest in their business again.”
In its Outlook, the agricultural board AHDB foresees a marginal growth in milk production of around 0.3%. However, that may come out lower, and even negative, if margins continue to deteriorate. “Global demand for dairy will remain problematic due to low economic growth, although there could potentially be higher import demand from China later in the year. However, domestic demand continues to suffer the consequences of poor consumer sentiment, which will lead to lower sales of all products. All this means that milk prices will continue to fall in the first half of 2023, which may weaken in the second half of the year if inflation decreases and demand recovers.”