Challenges and Fluctuations in the UK Dairy Market Amidst Global Changes

The UK dairy market is currently undergoing a period of significant variability, particularly in milk prices. The Department for Environment, Food & Rural Affairs (DEFRA) reported a milk price of 46.54ppl for September, marking the 15th consecutive month prices exceeded 40ppl. This period coincides with a high milk production volume of 1,239 million liters for the same month.

In November, disparities in milk prices became pronounced. Farmers in aligned retailer pools saw some price increases, while others faced reductions ranging from 1p to 3p per litre. Notably, First Milk's price dropped by 9p over three months to 34.72p for standard milk and 35.85p for manufacturing milk. Yew Tree, including Muller Yew Tree suppliers, reported the lowest price at approximately 30p per litre.

In contrast, Waitrose offered the highest price at 46p per litre, highlighting a 50% differential between the highest and lowest prices. The market instability is further reflected by 18 out of 26 major processors reducing their prices in November, with more reductions expected in December.

Commodity prices have also seen declines, with UK butter prices around £4500 to £4600 per tonne and skimmed milk powder nearing €2000 per tonne, the lowest since the onset of the COVID-19 pandemic. Mild cheese prices fell to as low as £2850 per tonne, although recent increases in cheddar and mozzarella prices suggest some stabilization.

Globally, milk production has surged, with the UK up 7% in September, the EU up 4.5%, and the US up 4%. This increase, coupled with six consecutive negative Global Dairy Trade auctions, suggests continued pressure on milk prices.