Thursday, 27 August 2020
By Chris Gooderham
Thanks to those who took the time to respond to our review of the market indicators. We are pleased to launch the new 2020 versions of AMPE and MCVE from this month (available from 28th August).
We will continue to record the 2014 calculations on the database over the next few months while transitioning to the 2020 numbers.
Why have we changed them?
Every three years we undertake a review of our market indicators to ensure they remain relevant. The last change to the indicators was made in 2014, while in 2017 we decided to keep the calculations unchanged.
The value in market indicators is in being able to identify trends, and we therefore keep any changes to the calculations to a minimum. However, it is also important that the indicators are representative of the market.
What has changed?
Details of the changes can be found here. However, a summary is given below:
We have updated the assumption on milk quality to the UK average of 4.1% butterfat and 3.35% protein. This change improves the milk yield, and as a result, both AMPE and MCVE have increased. This does not mean that the same litre of milk is now worth more money than it was in 2014. What it shows is the extra value in delivering higher butterfat and protein in milk.
It should be noted that, where AMPE is concerned, the UK puts more milk into butter and milk powder during the spring months when fat and protein levels are at seasonal lows.
We have updated the cost elements of the indicators to reflect the higher unit costs of labour and energy, compared with 2014.
When the revised AMPE was launched in 2014, we introduced the assumption of standardised skimmed milk powder (SMP) with the addition of lactose powder. At the time lactose powder prices were averaging around £1,000 per tonne and the inclusion rate was assumed at 78kg per tonne of SMP.
Over the last few years, lactose powder prices have varied significantly from this fixed assumption. The 2020 calculations now use the lactose powder prices quoted by USDA in the month to reflect the actual cost of buying in lactose to standardise SMP. This cost also includes the import tariff for bringing lactose powder from the US to the UK. The inclusion rate is also increased to 85kg per tonne of SMP.
As well as launching the new 2020 calculations, we are working on a tool that enables you to enter your own specific details to create bespoke AMPE and MCVE calculations. We are aiming for the bespoke calculation to allow you to change assumptions on milk quality, factory throughput and costs. It should also allow you to add milk haulage costs and a processor margin, both of which are excluding from the current indicators. To be kept up to date with developments, ensure you are signed up to Dairy Markets Weekly here.
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