Wednesday, 25 October 2023
In the second quarter of 2023, processing costs for dairy products eased in some respects, thereby increasing the value of AMPE and MCVE. These changes will be updated in our latest October publication on 25 October.
In Q2 2023, the cost of electricity declined by 9.4% compared to the previous quarter and gas declined by 11.5%. On the other hand, overall inflation (as measured by the Consumer Price Index) increased by 2.4% on the quarter. When compared with the same quarter in the previous year, electricity, gas and overall inflation rose by 17.7%, 10.6% and 7.7% respectively.
The net impact of the latest quarterly cost declines is for the average processing costs within both AMPE and MCVE to move down on the quarter. AMPE costs are now 0.32ppl lower than the previous quarter while MCVE costs are lower by 0.26ppl on average.
The decline in energy costs were marginally offset by a continued increase in overall inflation and labour costs. Though energy costs have eased, they remain at historical high levels. When compared to average processing costs in Q2 2022, AMPE cost has moved up by 0.6ppl and MCVE cost has moved up by 0.7ppl.
Note that this latest update only reflects cost inflation to June 2023, including data revisions. The next update will be in January 2024 following the ONS release of the 2023 Q3 cost indexes. A breakdown of the latest costs is given below:
The new costs include changes in:
- Energy costs based on the movement in the average prices of gas and electricity purchased by the manufacturing industry in GB as quoted by BEIS, up to Q2 2023.
- Labour costs based on the movement in the unit labour cost for the whole economy as quoted by ONS– these currently go up to Q2 2023.
- Other costs based on the movement in inflation (CPI)from the 2020 update to Q2 2023.
For further changes and to see how costs impact your own business, we offer an online spreadsheet that allows you to enter bespoke costs and milk quality into the calculations. This will then calculate unique indicators based on your own circumstances.
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