Projected farmgate milk price changes

Updated 3 December 2020

These projections indicate the expected movements in farmgate milk prices for the next three months, based on movements in the dairy markets.

Overview

  • AMPE fell by 0.60ppl (2%) due to reduced prices for both butter and SMP in November. 
  • MCVE was unchanged from last month
  • The net impact of these movements was a drop of 0.2ppl in the overall market value of milk (MMV) from the previous month.
  • There are however some risks on the horizon to processor returns, arising from EU exit, which could put pressure on farmgate prices in the short term.


Additional information

  • The projected change is based on the strong link found between movements in the value returned to manufacturers from the market (MMV) and movements in farmgate milk prices.
  • On average, it was found that a 1ppl change in the MMV will lead to around a 0.5ppl change in the overall GB average milk price, generally three months’ later.
  • Differences will arise due to the markets in which milk buyers operate as well as the mechanism they use to set the milk price. These will impact the timing of price movements as well as the size of the change.
  • Other factors which are likely to impact milk prices will be the degree of competition for milk in the market, changes to available processing capacity, import competition and contract negotiations.
  • [1] The Milk Market Value (MMV) is a weighted average of AMPE and MCVE on a 20:80 basis. This was found to be the best predictor of movements in farmgate prices based on historical data. The analysis was done excluding prices paid on retailer-aligned contracts. The impact of the adjustment of AMPE and MCVE following the 2020 review has been accounted for, and the model updated.
Visit the UK farmgate milk prices page Visit the AMPE & MCVE page
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