Projected farmgate milk price changes

Updated 25 April 2024

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

• UK wholesale prices eased marginally in April for most dairy products, with the exception of butter as we are nearing spring flush. Average prices for butter increased 1.2% whilst SMP eased by 2.0%. AMPE subsequently moved down 0.5p to 36.1ppl as processing costs also increased.
• MCVE followed the same path and recorded a decline of 0.7p to 35.6ppl as mild cheddar prices were down 0.6% month on month, paired alongside increased processing costs.
• These changes resulted in the market value of milk (MMV) falling for the third month, down 0.7p to 35.7ppl.
• The continued decline in MMV denotes pressure on farmgate prices, paired with the expectation that milk production will seasonally rise during the spring flush.  However, with milk deliveries currently back year on year, prices may be supported if demand is sustained.
• The market indicators have been updated to reflect returns based on cost data up to Q4 2023 and will be updated with Q1 2024 data in July 2024.

• 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.