Co-ops’ strong performance can buck bearish milk price trend
IF the invigorated co-ops can deliver strong pricing this year, it could help mitigate some of the bearish pressures on milk prices.
The Dairy Group director Nick Holt-Martyn said he believed competition for supply in the UK, really could act against the influences of global commodity prices.
He acknowledged processors were currently ‘between a rock and a hard place’ but nevertheless, the ‘plcs’ would be forced to keep up with the strongly performing co-ops - or lose supply.
And another factor which could come into play was the current cold snap if it limited the spring flush.
“The graph (right) shows the rapid decline in butter and cream returns and echoed more recently by SMP and WMP. It also shows the resilience of the cheese market to date, and historically.
“Commodity returns are heading back to levels last seen in late 2009, which will put pressure on the rest of the UK market,” he said.
“Although the UK is ostensibly an added value industry, commodity processing particularly in the spring flush, underpins market returns.
“Even with liquid and cheese dominating the utilisation at 77 per cent, commodity products including cream (where the added value doesn’t get passed back to farmers), account for 23 per cent of milk. In the spring flush, it peaks at around 27 per cent, so the level of commodity market returns through the summer are important to UK pricing.”
However, Mr Holt-Martyn pointed out market returns at 2009/10 levels did not mean farmgate prices could fall back to that level without serious consequences for supply.