Milk prices have been on a rollercoaster ride since the start of the COVID-19 pandemic and while huge differences remain between the processors on the values paid ex-farm, there are signs of a change with global supplies on the slide.

That was the good news story from industry commentator, Chris Walkland, who told delegates attending the Challenging The Norm dairy conference in Ayr, that prices should improve in the coming months.

“Things are getting better – a bit. There is unlikely to be as many price negatives in the forthcoming months as there has been but producers will still have to learn to live with the increased variability and volatility of milk prices.”

He added that the market is now seeing the biggest difference between milk prices with Marks and Spencers at 45.7p per litre compared to Lakeland down at 29p, which is in stark contrast to the values paid in January 2022 when the cheese processors were paying the big prices.

“Liquid milk is doing pretty well and there is a bit of premium opening up for it when retail milk prices remain relatively high at £1.55 for a four-pint carton compared to cheese prices which are under real pressure when consumers have turned away from branded products.”

Such have been the difficulties in the cheese market caused by large supplies made when milk prices were high and a weak demand due to inflationary price increases at the retail level, that some processors are under severe financial pressure with increased costs of storage and higher interest rates. Hence the reason for such processors now paying minimum values for milk.

Looking at milk supplies, Mr. Walkland said the UK is producing more milk than in 2022 but less than in 2021, which coupled with tightening supplies in Europe and further afield should bolster prices.

“Milk supplies are exceeding demand but supplies are dipping,” he said pointing out that overall milk supplies produced in Australia are the lowest in 30 years and down 1.75% while New Zealand and the US are also now sliding.

Another sign of future price increases is the Global Dairy Trade Index, which over the past three months has been on the rise. Add in UK commodity prices for butter, cream, SMP, Mozzarella, and spot milk, and there is more positivity in the market than there has been all year.

Current prices for butter and cream have risen to £3800 and £1680 respectively, with SMP and Mozzarella at £1950 and £3100. Cheddar values remain unchanged at £3300.

EU prices are also on the up, with butter valued at €4650 and cream at €6330.

“Dutch butter prices are up for a third consecutive week and EU cream prices have been on the rise for the past six weeks,” said Mr Walkland.

Futures AMPE prices in the EU and NZ also look positive for the next few months and into early 2024, when Mr. Walkland expects small improvements to eventually filter through to producers.

However, with the UK spot price for milk remaining pretty much unchanged at 35p per litre against average costs of production at 40p, he warned that all producers need to be wary in the coming months.