MMN September 2024 – Milk Market Update

Milk Market Update

Dairy Commodity Markets

• Fonterra’s latest on-line GDT auction (3^rd September) resulted in a slight drop (-0.4%) in the weighted average price across all products, reaching US $3,833/t. This follows a 5.5% rise at the previous auction in mid-August and is the first negative result since the start of July. The biggest rises were seen in butter milk powder and mozzarella, up 8.4% and 7.0% respectively. The biggest drops were seen in lactose and whole milk powder, down 8.9% and 2.5% respectively. Full results are available at https://www.globaldairytrade.info/en/product-results/ 

• Apart from skim milk powder (SMP), butter, cream and mild cheddar continued their upwards trajectory in the UK wholesale markets for August. Butter broke the £6,000/t barrier again for the monthly average price – the last time this happened was in June 2022 and before that, September 2017, where it peaked at £6,150/t. Butter supplies are currently very tight on the back of limited cream supplies and less butter being produced. UK prices are largely driven by EU markets and the EU demand for butter and cream has been strong.

  Commodity	Aug-24	Jul-24	%	Aug	% Diff 2024-
  	£/t	£/t	Difference Monthly	2023	2023
  				£/t
  Bulk Cream	2,703	2,528	7	1,623	67
  Butter	6,100	5,680	7	3,680	66
  SMP	2,020	2,010	0	1,850	9
  Mild Cheddar	3,860	3,770	2	3,330	16

  
  

  Source: AHDB Dairy – based on trade agreed from w/b 22^nd July – 12^th August 2024. Note prices for butter, SMP and mild cheddar are indicative of values achieved over the reporting period for spot trade (excludes contracted prices and forward sales). Bulk cream price is a weighted average price based on agreed spot trade and volumes traded. 

• The availability of cream is also tight due to low milk supplies and the seasonably lower butterfat percentage, although this is now starting to pick up again. The cream price is the highest it’s been for two years now, where it reached £2,858/t in September 2022.

• The milk protein products (cheese and SMP) have not seen the same volatility, with the market for SMP quiet, and mixed demand for mild cheddar.
• The AMPE price indicator is currently 1.73ppl ahead of MCVE, mainly due to the increasing butter price. The Milk Market Value is up to 41.29ppl for August, the 4^th consecutive rise since April, when the indicator was 35.68ppl. These monthly increases indicate that farm-gate values will likely continue to increase into the autumn.

  				Net amount less
  	Aug	Jul-24	Aug-23	2.4ppl average
  	2024	ppl	ppl	haulage - Aug 2024 ppl
  	ppl
  AMPE	42.68	40.49	28.61	40.28
  MCVE	40.95	39.65	32.9	38.55

  Source: AHDB Dairy

• Defra put the UK average farm-gate milk price at 39.48ppl for July, 0.57ppl higher than the June price and 11% up on the July 2023 price. The UK milk volume for July was 1,246 million litres, which was 2.3% less than the previous month and no change compared to July 2023.

GB Milk Deliveries and Global Production

• Milk production is running slightly below last year as of the end of August. Daily deliveries for the w/e 31^st August were at 31.91mlitres, which is 0.1% more than the previous week but -0.9% less than the same week last year (-280,000 litres/day).

• Global milk deliveries for the six key exporting regions totalled 728.4mlitres/day for June, just 0.1mlitres/day less than in June last year. Production was up in the EU (+1%), Australia (+3.4%) and the UK (+0.1%) for June, with declines seen in Argentina (-7%), US (-1.0%) and New Zealand (-1.1%). The main reasons for production declines in the US were recent heat stress conditions and the huge reduction in cow numbers in 2023. Production recovery in Argentina will likely be seen over the next few months with cooler weather on the way.

Monthly Price Movements for September 2024

Other News

• The number of dairy herds in Scotland is down to 773, a drop of 21 since the start of the year, according to the Scottish Dairy Cattle Association. The average herd size has increased to 233, with a total of 180,250 dairy cows, just 398 less than six months ago.

• Bluetongue BTV-3 virus is currently present in the Southeast of England and has recently been detected in Yorkshire. Remember this is a notifiable disease and any suspected cases in Scotland should be reported immediately to APHA. For the latest information on Bluetongue BTV-3 please visit: https://ruminanthw.org.uk/bluetongue-virus/

• The Ruminant Health and Welfare Group has developed new resources to encourage farmers to report all abortions and stillbirths, as well as submit samples for testing to help better understand and manage their herd’s disease status. The aim is that more reporting of these losses will aid improvements in herd efficiency, as well as contribute better understanding of disease risk for the wider industry and identify possible emerging threats. This is particularly important just now given that Schmallenberg continues to be an issue and Bluetongue BTV-3 now circulating the in UK. Both of these diseases can cause late-term abortion. More information can be found here: https://ruminanthw.org.uk/reporting-all-cattle-abortions-and-stillbirths/

• Both First Milk and Müller have announced further price rises for October, with the First Milk price increasing by 0.6ppl to 42.6ppl and the Müller price rising 1ppl to 41.25ppl.

• Organic Herd (formerly OMSCO) has announced another 2ppl rise in its milk price for October, bringing its standard litre up to 56ppl. This follows a 3ppl rise in August and a 1ppl rise for July. The cooperative said demand for British organic products is increasing and they are committed to paying a stable and sustainable milk price to their members.

• Variable costs continue to fall, with feed prices declining along with fuel prices. However, fixed costs are still thought to be rising due to inflation and greater finance costs. The Dairy Group estimate production costs are currently around 44ppl.

Lorna MacPherson, lorna.macpherson@sac.co.uk; 07760 990901