DAIRY INDUSTRY analyst Ian Potter has warned of financial gloom ahead for milk producers.

Noting that there were no new November 1 milk price increase announcements, and that milk production statistics were looking bleaker as each week passed, Mr Potter said that there might be a 'dark tunnel' ahead.

Germany is now producing around 4% more milk than the same time last year, while France is up on the year by 2.8%. Europe’s third largest producer, the UK, is rapidly heading towards a 2% increase in total milk production in the first six months of this milk year starting April 1.

Mr Potter said: "According to AHDB Dairy, EU milk production is up an average 3.3% across 28 member states compared to 12 months ago, equivalent to an extra 102 million litres.

“When the EU milk production giants Germany and France ramp up milk production closely followed by the UK, the end result almost appears inevitable. Time to buckle up," he warned. “Spot milk has plummeted to almost 33p per litre and cream prices continue to crash back from a high of £2.95 now trading at £2, a difference worth 9.5p per litre to a liquid processor. However, it’s still a relatively strong price.

“AMPE has dropped by an eye-watering 7.2p –18% – in just one month from 39.9p to 32.7p. To pile on the pressure, the suggestion is that when intervention buying re-opens in March 2018 it is via a tender process with the fixed price for intervention SMP and volume targets removed from day one," he added. “Futures prices instantly and significantly reacted to this news heading south because if this policy is confirmed there will be no floor in the market.

“It would appear that only Mother Nature can intervene and she could either cut production or add to it further come the spring. Remember that there is still close to 400,000 tonnes of SMP in EU Intervention stores, which will have to be sold."