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Projected farmgate milk price changes
Updated 23 August 2024
These projections indicate the expected movements in farmgate milk prices for the next three months, based on movements in the dairy markets.
Overview
- Post holiday demand lifted dairy wholesale prices across all product category in August.
- AMPE gained 2.2p month on month to stand at 42.7ppl on the back of strong growth (7%) in butter prices.
- MCVE also grew month on month up 1.3p to 40.9ppl. This followed moderate growth (2%) in mild cheddar prices.
- These changes resulted in the market value of milk (MMV) strengthening by 1.5p to sit at 41.3ppl in August.
- Increased demand amidst a background of limited product availability is influencing future pricing, with concerns around coverage for the latter part of the year.
- The market indicators were updated in July to reflect cost data up to Q1 2024. The next be update will be in October using Q2 2024 data.
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.
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