Short term outlook bleak for milk prices

Dairy farmers have been warned to expect more financial pain, as Arla Foods announced that its farmgate milk price will fall to a new low in December.

The average UK dairy farmer has faced falling income from milk since February.

The amount farmers receive for their milk has tumbled with each consecutive month since February, with the latest average price paid to farmers down to 30.81 pence per litre (ppl) in September, from 33.93ppl in February.

And with prices continuing to slide, the National Farmers’ Union (NFU) warned the situation will get worse before it improves.

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Indicative of the trend is the new milk price for Arla Foods amba members, which is due to fall by 1.63ppl to 26.84 ppl from December 1.

Ash Amirahmadi, Arla UK’s head of milk and member services, said: “Arla has taken mitigating actions to reduce the impact on our owner milk price but, ultimately, it is not possible for Arla to negate the impact of global markets.”

The Russian trade embargo, less demand from China after it stockpiled supplies last year and an oversupply of milk globally is affecting prices.

Sian Davies, the NFU’s chief dairy adviser, said: “Most dairy analysts predict a recovery in global milk prices in the third quarter of 2015 so unfortunately yes, in the short-term farmgate milk prices will continue on their downward trend.”

Patty Clayton, senior analyst at DairyCo, added: “At the moment there aren’t any signals to suggest the global market prices are going to recover quickly.”