UK milk sentiment remained bearish this week, with prices declining slightly week-on-week (w-o-w). While milk intakes were reported above 2022 levels for week 13, it remains uncertain how strong the milk volumes will be in the UK dairy sector for the flush season. Producers are concerned that farmers have let cows out onto the fields sooner than usual to boost production and to generate high returns from the still elevated farmgate prices. Farmgate prices are anticipated to decline through the milking season. While the early grazing of cows is likely to support milk availability during the early phase of the milk flush season, it will also likely result in an early end to the flush.
While farmgate prices (42.5p/litre April) remain markedly higher than the spot milk prices, farmers are still being charged a penalty of between 1-2p/litre if they supply more than the contracted milk volumes. Processors charge penalties if the milk intake surpasses the demand and production capacity, which is intended to reduce milk production by farmers. However, with farmers still achieving margins, it remains uncertain how much of an impact this will have in the coming weeks. While the availability of milk seems to be ample for H1 2023, many processors have already raised concerns for the second half of the year.
For reference, the Mintec Benchmark Prices [MBP] for Milk EXW United Kingdom [Mintec Code: JQ45] was assessed at £0.29/litre on 30th March, down 3% on the week.
British cream prices dropped notably this week, with market sentiment remaining bearish during the assessment period. During the previous week, the market sentiment was still supported by Easter demand, but this has now dried up. According to multiple buyers and sellers, the seasonal Easter demand has been now covered, leading to a significant reduction of buying interest for cream and resulting in a strong bearish sentiment this week. As availability is anticipated to increase further over the coming weeks, supported by seasonal increasing milk intakes, the market sentiment for cream is anticipated to remain bearish over the coming weeks, but price reductions are expected to be moderate.
The MBP for UK Cream DDP 40% [Mintec Code: DI18] was assessed at £1.55/kg, a decrease of £0.04/kg compared to the previous week’s assessment.