In contrast to tightening milk supplies in the EU as a whole, UK milk yields have hit 20-year highs every month since the start of the year.

Figures from AHDB Dairy reveal cumulative production for the first quarter of 2019 is 3.4% higher in the UK that last year. It has to be noted however, that the lack of grazing curtailed milk production through most of the 2018/19 milk year (Apr-Mar), leaving the overall rise in annual production at 1.1%.

According to the report, milk yields have been bolstered by higher use of purchased feed, a mild start to the year and increased calvings. Add to that higher than normal imports of dairy products in the first quarter of this year, due to the threat of import tariffs, and the increased production has put pressure on storage space, with farm-gate prices slowly but surely beginning to be hit.

While most processors held their price in May, a few announced price decreases in the range of 0.34-0.75ppl.

Surprisingly, given the volumes of milk currently being produced, there have only been a few announced prices changes for June. Dairy Crest has announced it is holding its milk price; Barber’s is dropping it's price by 0.75ppl, while those on Müller’s Booths contract will increase by 0.55ppl next month.

On average, prices paid to farmers in the 2018/19 milk year remained in the region of 29ppl – slightly above the five-year average of 27.5ppl.

Overall, year on year growth in milk deliveries is forecast to slow in the second half of the production season. While lower pricing will have some impact on production levels over time, the smaller dairy herd and a projected drop in fertility due to the hot dry summer in 2018 are the main factors which are expected to restrict production growth this year.

This compares to conditions across the EU28, where poor quality forage and a reduced dairy herd have limited total milk deliveries, with the knock-on effect helping to support prices on wholesale markets, and in turn farm-gate values.

Globally, milk production is expected to remain tight through 2019. High input costs and low farmgate prices have squeezed margins in Australia, the EU and the US, leading to reduced collections.

Product availability in the EU is estimated to be generally low, with the exception of butter. However, competitive pricing for EU products is driving good export performance, while the reduced milk production has limited any excess stock build-up.