The NFU is urging milk buyers to recognize the improvement in current markets and start paying sustainable prices to milk suppliers.
Spot prices for milk are now approaching 40ppl (51 cents/liter), the NFU says, adding that quotes for next month are reaching 50ppl (64 cents/liter).
NFU dairy board chairman Michael Oakes said milk buyers are lagging behind in passing on the huge lifts in market prices to their suppliers.
Lag understood, but delay unacceptable
Oakes said that since May this year, market indicators have started to show a differential between the prices dairy farmers should have received compared to what they actually did get, a sum he estimates at around £200m.
He acknowledged that farmers understand the time lag that is part of dairy trade, and have been patient – to a point.
“Our message is clear – until milk buyers start backing British dairy farmers and start paying fair, sustainable milk prices, volumes will not recover,” Oakes emphasized.
Demand to outstrip supply
Dairy analyst Chris Walkland says that the gap between UK farm prices and commodity prices is widening.
He notes that most forward price indicators (AMPE, MCVE, Futures, GDT, etc.) are showing prices should be between 25ppl (32 cents/liter) and 30ppl (38 cents/liter) at the moment.
Yet most non-aligned prices are still at or around 20ppl (26 cents/liter). The July Defra average milk price, which included aligned prices, was 20.57ppl (26.25 cents/liter).
Walkland said that AHDB Dairy’s latest Forward Market Performance (FMP) indicator paints a positive position for the supply/demand balance for the rest of the year.
Even with the wholesale price increases over the past month, he said, processors that trade on futures still believe demand will outstrip supply for the remainder of 2016.
Hiccup at GDT
In spite of the general recent upturn in prices, the Global Dairy Trade (GDT) Event 173 concluded with the GDT Price Index down 3.0%.
The GDT, which takes place every two weeks, had shown signs of recovery, with positive results throughout August and September.
However, at the latest event, only the BMP (butter milk powder) index rose, by 9.3%.
All other categories were down, with lactose suffering the most, with the index down 9.7%.