Projected farmgate milk price changes
Updated 25 July 2022
These projections indicate the expected movements in farmgate milk prices for the next three months, based on movements in the dairy markets.
- The summer holiday lull brought some weakness to wholesale markets, with butter and SMP both down on the month. AMPE subsequently fell to 54.7ppl in July, down 3% on June
- MCVE also declined in June, down 2% to 53.0ppl. Mild Cheddar prices were stable, but whey powder prices fell.
- The net impact of these movements on the overall market value of milk (MMV) was a decrease of 1.2ppl.
- Although MMV declined this month, gains in previous months mean that the overall outlook for market-based farmgate prices is still slightly positive over the next 3 months.
- July market indicators use updated cost data, covering costs for Q1 2022. However, it must be noted that as the cost elements for processing remain in arrears, current values for AMPE and MCVE will not be a true reflection of current market returns.
- 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.
-  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.
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