Projected farmgate milk prices
Updated 27 July 2020
These projections indicate the expected movements in farmgate milk prices for the next three months, based on movements in the dairy markets.
- The July wholesale butter price rose 3% on the month while the SMP price fell 6%.
- The net impact of these price movements decreased AMPE by 0.8ppl (3%)
- Marginal movements in the mild Cheddar and whey prices increased MCVE by a marginal 0.1ppl (0.4%)
- The net impact of these movements was an improvement in the overall market value of milk (MMV) of -0.1ppl from the previous month.
- 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 0.6ppl 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.
-  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.