Projected farmgate milk price changes

Updated 25 July 2024

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

• Movements in dairy wholesale prices were mixed across product categories in July as the summer holiday period kept demand quiet during the month.
• The market indicators have been updated to reflect returns based on cost data up to Q1 2024 which has resulted in lower processing costs. The next be update will be with Q2 2024 data in October 2024.
• Mild cheddar saw growth of 3%, offering some support to MCVE, alongside lower processing costs, which saw moderate growth of 1.5ppl compared to June.
• AMPE was flat month on month at 40.5ppl, despite SMP price easing by 2% as flat butter prices and lower processing costs offset this movement.
• These changes resulted in the market value of milk (MMV) lifting by 1.2p to sit at 39.8ppl in July.
• Demand after the summer holiday period will be a key influence on future prices, with concerns around coverage for the latter part of the year amongst a background of lower supply.

• 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.