THERE was little Christmas cheer at the dairy market seminar at AgriScot, with the prediction that milk prices are set to drop in the New Year.

That came from industry analyst Chris Walkland, who pointed out that the recent 'honeymoon period' has been fairly brief, with prices only starting going higher in October and November, with the non aligned average price crossing 28p in August, and 30p in November.

Mr Walkland said: "But if you turn the clock forward, its all change again with milk volume set to go up at the start of the spring flush in April. That's because the Milk Price:Feed Price ratio – a figure of how profitable it is to feed for milk – is at a record high, and it normally takes four to six months for farmers to react to high milk prices, and for their cows to ramp up.

“Producers need to keep cool and not over react," he suggested. "That's what commissioner Hogan said at the World Dairy Summit in Belfast a few weeks ago and I would agree. But farmers will ignore any comments like that and produce as much milk as they can.

“The problem is that what is often right for an individual business – i.e produce as much as possible to maximise income to reinvest or pay off debt – isn't necessarily what's right for the sector as a whole," he said.

All of the indicators and markets suggest that the farmgate milk price will level at 25p in the short term, said Mr Walkland, who advised producers to budget for this while hoping for 26p to 27p for first part of next year through and past the spring flush – but only on the grounds that milk prices were slow to go up, so should be slow to come down!