As ever in the summer, the market is seasonally quiet and because of that, I can’t see many significant milk price rises on the cards I’m afraid. But also no reductions either so my best guess would be a stand on (for September) by many if not most processors. We shall see...

So ran some of my last views in The Scottish Farmer, on July 23. Well, I got that right didn’t I? Not!

Little did I, or anyone for that matter, know what was to come next. Far from being quiet the market went mad, with prices for butter and cream rising at a pace we’ve rarely, if ever, seen before.

Chris Walkland is an industry specialist and spokesperson on milk pricesChris Walkland is an industry specialist and spokesperson on milk prices

The Dutch butter price increased from a reasonable €6700/t at the time of writing the article to €8050/t last week to set a new record by far – the previous high was €7350/t.

For the UK, the previous high for butter was £6250/t, and it’s now at £6800-£6900/t. For cream the current price of around £3.25/kg has eclipsed the previous high of £2.90/kg or so, and if we look at the cream income to a processor we’re now at about 18p. The previous high was 16p some two years ago.

But butter and cream aren’t the only commodities where prices are increasing.

Cheese prices have also soared over the last three weeks, after being stagnant for several months before. Curd, for example is at €5000/t. This is important because a high curd price and good export demand helps to keep the UK cheddar market tight – after all why should a processor store and (expensively) mature cheese if they can sell young curd at a similar price.

Mild cheddar is now at £4250-£4300/t, whereas it had been at £3500/t over the summer. Mozzarella has had a tough time of it recently and was as low as £3150/t, but now it’s £1000 more! Mild cheddar is now at its highest price since January 2023, when prices were on the way down from their £4900/t peak in the summer of 2022, with mozzarella the highest since its £4600/t peak in September 2022.

There’s also some encouraging movement on SMP prices too. Dutch origin SMP fell to a low of €2330/t in the summer but has risen for five consecutive weeks now to €2570/t. The GDT is also helping, and is up for four auctions in a row, with the latest Arla price at the second September auction also (surprise, surprise) being €2570. That equates to £2170, which is still a poor price for SMP.

So what does all this mean for milk prices going forward? Well Dale Farm is pointing the way this month with a 3p increase for its August price (NI companies pay retrospectively).

That takes its price to around 42p on a standard litre. I expect other companies there to match that.

Milk prices v cream income to a processorMilk prices v cream income to a processor

In GB the current highest price for October is just under 42p, with Crediton paying 41.75p. Arla is at 41.57p for September. Thus it is almost certain that milk prices will increase again for October and November, and possibly December too if the current prices hold. I wouldn’t expect many or even any to increase by 3p in one fell swoop like Dale Farm, though. But you never know!

But will prices get to 50p as some, if not many, farmers are obviously pondering? Well I doubt it.

At the time of writing the EU futures for the next six months were projecting a milk price of 43p for Q4, and reducing to 40p for Q1 next year.

But New Zealand butter futures prices are much lower than EU prices and this might act as a brake.

If we factor in New Zealand futures prices, the GDT forward prices, the current real market and the futures, the price points to a range of 42p to just above 43p for the next few months. I don’t have 44p on the board at all, but my prices are averages for a standard litre, and I wouldn’t be at all surprised if some processors hit 44p. They’ll almost certainly hit it on a manufacturing litre – the highest price there is currently Arla at 43.3p, the average is 42p.

There is, though, a heck of a long way to go from there to 50p – an insurmountable way in my humble (and of course not always right opinion). And I think that because, firstly, we’re only two or three milk price movements away from January, and then market sentiment inevitably turns towards the flush and what the prospects might be.

Secondly we are now through the trough, and milk volumes will start to rise which will take the pressure off, and adding to that there is a very favourable Milk Price:Feed Price Ratio which should also contribute to additional milk volumes this coming quarter.

Thirdly processors normally want to try and mitigate high prices at the start of the year in case there is a monster flush, which then causes problems later and fourthly the SMP price has a long way to go to help support prices at that level.

I also think a really high price is counterproductive, because the cure to high prices is high prices, and there’s no doubt in my mind that a very high peak price wouldn’t be around for long. You’d be better off in the long-term having a lower price that is more sustainable and around for longer. That said, the Arla milk price model doesn’t function like that and rises and falls with the income Arla receives, with other firm’s striving to follow at times.

By Agriscot on November 13, we’ll know more and the prospects for the winter might be clearer. I’ll be on the panel again for the Kite Consulting and Scottish Dairy Hub dairy seminar, which is held upstairs at the event. I’ll be doing an update on the markets again then, and also for this paper. Come along, bring your questions (no tricky ones please!) and enjoy some free nosh on the Kite stand afterwards. See you there!