Agribusiness News February 2023 – Milk

UK production increase puts more pressure on prices

• UK milk output has been rising since September 2022. EU milk production has also been rising recently.
• UK milk output increased to 1,238.34m litres during December 2022 (up 20.16m litres on the year).
• Rising production is putting downward pressure on farmgate milk prices.

AHDB milk production data shows that output for December 2022 is estimated at 1,238.34m litres (before butterfat adjustment) – an increase of 20.16m litres on a year-on-year basis. Cumulative UK production for the 2022/23 milk year to the end of December 2022 stands at 11,230.18m litres (before butterfat adjustment). After a sluggish start to the year, UK production has been increasing since September 2022 (see chart below). Cumulative production to the end of December 2022 is now only 9.78m litres lower than the same time last year. The UK average milk price for December 2022 is estimated at 51.51ppl, an increase of 0.45ppl from the previous month (51.06ppl) and a year-on-year increase of 17.00ppl from December 2021.

Farmgate prices: February 2023

Announcements for February 2023 include:

• Sainsburys – Members of the Sainsbury Dairy Development Group (SDDG) will receive a 1.00ppl price reduction from 1st Feb 2023. This takes the liquid standard litre price down from 47.50ppl to 46.50ppl for Muller suppliers. Arla members of SDDG will receive the same 1.00ppl reduction from 1st Feb 2023 and will see their prices move down from 47.38ppl to 46.38ppl.
• Tesco – The Tesco Sustainable Dairy Group (TSDG) is set to reduce by 1.00ppl from 1st Feb 2023. The decrease takes the liquid standard litre price down from 48ppl to 47ppl, in line with the Müller Direct milk price reduction (below).
• Graham’s Dairies – 2.00ppl price cut from 1st Feb 2023. This takes the liquid standard litre price down from 46.00ppl to 44.00ppl.
• Müller Direct – 1.00ppl price cut confirmed from 1st Feb 2023. This takes the liquid standard litre price for Scottish suppliers back to 46.75ppl (47ppl for English & Welsh suppliers). See Milk Price table, below.
• Müller organic – 1.00ppl price cut confirmed from 1st February 2023. The organic farmgate milk price reduces to 55.00ppl for Feb 2023.
• Müller Lidl – 1.00ppl price cut to the Müller-Lidl three-year fixed price contract from 1st Feb 2023. The reduction is in line with the reduction to the Müller Direct milk price and takes the liquid standard litre price down to 47ppl from 1st Feb.
• First Milk – FM will hold prices from Jan into Feb 2023. See Milk Price table, below.
• Fresh Milk Company – 1.40ppl price cut confirmed from 1st Feb 2023. This takes the liquid standard litre price down to 46.81ppl (table below).
• Yew Tree Dairy – 1.00ppl reduction to A volume litres. This takes the liquid standard litre price down from 48ppl to 47ppl from 1st Feb 2023.
• Arla Foods amba – Due to the early release of the Jan 2023 edition of Agribusiness News, Arla’s reduction to the Jan milk price went unreported. The Arla milk price reduced by 1.00-euro cent from 1st Jan 2023 with a further reduction being applied because of a negative adjustment to the quarterly currency smoothing mechanism. In total, the liquid standard litre price reduced by 1.13ppl to 49.11ppl from 1st Jan 2023.

Müller to adopt two-tier pricing in April

From 1st April 2023, Müller is to adopt a two-tier (A&B) pricing system in a bid to improve competitiveness, transparency, and stability for its 1300 suppliers. Müller estimate that 94% of its intake will receive the A price; this will be the price paid for all litres destined for Müller’s retail customers. The B price will be paid on the remaining 6% of intake which is destined for the ingredients market. The B price will be based on published global indices and it may exceed or fall below the A price at various times of the year.

alastair.beattie@sac.co.uk, 07771 797 491