Who Got the Cream From Improved Dairy Markets in the UK?
The 2010/11 milk year was characterised by strong commodity markets although this was not fully reflected in farmgate prices, according to the recent DairyCo Supply Chain Margins report.
“The prices farmers received for their milk increased by 5% compared to the previous year,” says DairyCo analyst Patty Clayton. “In comparison the market indicator AMPE, which reflects returns from butter and powder commodity markets, showed a 31% rise.”
She Adds: “With the expectation that farm input costs will continue to rise in the short to medium term, the fact that farmgate milk prices have not responded to the same degree as commodity markets has caused great concern in the industry.”
The report looks at the events of 2010/11 within the liquid and cheese markets and how these have affected gross margins along the supply chain for the year.
The liquid milk market was a year of two distinct halves, with the first half of the year seeing prices and margins remain essentially unchanged from 2009/10. In the second half of the year the retail price war led to events which dramatically reduced wholesale selling prices, leaving processors squeezed when farmgate prices also increased.
In Cheddar markets, processors were able to increase gross margins as a result of the combination of strong commodity markets and strong demand for Cheddar, while retailer margins fell.
