THERE WILL be little Christmas cheer for dairy farmers, following this week's forecast that prices for commodities like butter and milk powder will fall next year, ending the recent brief period of price rises.

Agrifood consultancy Promar noted that dairy commodity prices surged on the back of shortages during 2017, with butter prices hitting record highs during the summer, while UK average farmgate milk prices rose in some cases to 30.13ppl in September .

However, with global supplies now loosening, and year-on-year UK milk production soaring by 4.5% to 1.13 million litres last month, Promar predicted that this will translate to falling commodity prices in the UK.

Consultant Lizzie Bonsall said: “Global dairy wholesale prices appear to be in decline after a period of strong growth over the last 12 months. This change in the global marketplace has been caused by increased milk production, and quotations for butter, skimmed milk powder and whole milk powder easing in October.”

Prices were starting to fall as some key import markets were holding back on butter and whole milk powder purchases, she noted, due to impending supplies from Oceania. Butter, for example, fell last month, while European butter prices are down 30% since September, with indications of further falls in the new year.

These factors, combined with falls in the actual milk price equivalent global price indicator (-11% between September and October), limited skimmed milk powder demand in Europe and high volumes in EU storage, could also have knock-on effects for global dairy prices, she suggested.

Although a drop in dairy commodity prices would be good news for consumers and food manufacturers, British producers should brace themselves for fluctuations in farmgate price next year, Bonsall warned.

She added: "We are likely to see significant declines in farmgate milk price during the first part of 2018, based on latest market conditions – although there is no indication that they will challenge the previous low prices witnessed in the previous milk price cycle.”

First Milk vice chairman Jim Baird warned: “dairy markets have weakened recently and so the outlook for the UK market continues to worsen."