Projected farmgate milk prices
Updated 27 February 2020
These projections indicate the expected movements in farmgate milk prices for the next three months, based on movements in the dairy markets.
- Butter markets weakened in February, pushing down prices by 4% to £2,930/tonne
- The upward trend in SMP prices ended, with price dropping at the end of the month, bringing the monthly average down by £40/tone.
- The net impact of price movements in butter and SMP reduced AMPE by 1.0ppl
- A small increase in the mild Cheddar price gave some support to MCVE, which increased by 0.4ppl.
- The net impact of these movemnts was a marginal increase 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.