Projected farmgate milk price changes

Updated 25 November 2021

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

Overview

  • Substantial price increases for both butter and SMP saw AMPE increase 15.6% in November to reach 42.3ppl.
  • MCVE also moved up on higher prices for both mild Cheddar and whey. This resulted in an increase in MCVE of 2.7ppl (7.3%) on last month.
  • The net impact of these movements on the overall market value of milk (MMV) was an increase of 3.3ppl, assuming no change in processing costs*.
  • The latest movements suggest potential for increases to market-related farmgate prices in the coming months.

*The manufacturing costs used in the AMPE and MCVE calculations will be updated on release of Q3 manufacturing cost index data by the ONS, due for release 21 December 2021.


table of projected changes to milk prices to Nov21

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 Market Indicators page

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