July milk price update: Organic herd increases rates by 1ppl

Organic Herd has announced a 1ppl increase in their members milk price throughout July. This adjustment lifts the Organic Herd price to 51ppl on a standard litre basis.

Sara Ogborne, Organic Herd’s director of membership and communication, stated: “Our latest price rise reflects the growth in demand we are seeing for our organic milk. The July increase is in line with our commitment to returning to our members small, incremental but, crucially we believe, also sustainable improvements in their milk price.”

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First Milk has announced an increase of 0.8ppl, bringing its manufacturing standard litre to 40.3ppl, including member premium.

Farmer director and vice chairman, Mike Smith, remarked on the increase: “This spring has been particularly challenging for many dairy farmers, so it is great that we have been able to deliver this increase in milk price to our members at this difficult time. As always, we will continue to do all we can to maximise member returns in the months ahead.”

Dairy processor Muller will raise its milk price by 1ppl to 38ppl for its farmer suppliers.

UK wholesale prices (source: AHDB)

Farmers participating in Muller’s Advantage scheme will see their milk price rise to 39ppl.

Arla has revealed that its on-account price for conventional milk will rise by 0.81ppl and the UK organic milk price by 1.70ppl.

This will set the UK manufacturing price for conventional milk at 41.70ppl and organic milk at 52.57ppl.

Arthur Fearnall, Arla Foods amba board director, noted the stable or slightly lower global milk supplies and growing retail sales, albeit at a slower pace. UK Agricultural Director Paul Dover added: “With new products launching in the UK and news of new investment already committed, it’s an exciting time for Arla farmers.”

Commenting on the commodity prices, Susie Stannard, lead dairy analyst from AHDB said: “The Spring’s (and Autumn and Winter’s) endlessly wet weather did more than dampen spirits. It damaged prospects for turnout, grass growth and groundwork meaning the milk season got off to a very slow start with the spring flush being muted to non-existent with volumes back by 1.5%. Global production has also been on a downturn and dropped by 0.5% in April.”

She continued: “Shortages of milk have sparked fears for buyers who have finally stopped sitting on their hands and started buying, particularly fats.

“Latest commodity prices indicate butter is up a significant £580/t, bulk cream £190/t, mild cheddar £130/t with SMP lagging at only £50/t growth. This has boosted both AMPE by 3.5ppl and MCVE by 1.8ppl in a single month. Not quite the heady 5.6ppl growth in AMPE we saw in the volatile days of March 2022 but still impressive.”

“AMPE is The Actual Milk Price Equivalent and is an indicator of the factory gate value of a litre of milk which goes into Butter and SMP. MCVE is The Milk for Cheese Value Equivalent and is an indicator of the factory gate value of a litre of milk which goes into mild cheddar and whey powder/butter.”

Susie’s thoughts turned to how long this trend will continue: “Supply is tightening but demand will play a role. Chinese demand continues to disappoint due to increased domestic production with dairy import volumes back by 12% in Q1 leaving a lot of displaced NZ product on the market to service new markets.

“UK retail demand is healthy for both cheese and yogurt, according to Nielsen, seeing uplifts of five and 12% respectively (Source: NIQ Homescan Panel 12we 18 May 2024). Butter is still back based on cost-of-living pressures.”

She concludes: “Supply wise, our latest milk production forecast is back by 1.0% for the 2024/25 milk year which should offer further support to farmgate prices. However, supply and demand are finely balanced and the market situation will benefit from increased global demand to keep prices heading north.”