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Record milk price increases matched by rising costs
Thursday, 7 July 2022
Recent data shows there has been no ‘net’ benefit to farm finances from what appear to be record high milk prices as they have increased at roughly the same rate as agricultural input costs so far in 2022.
Milk production typically responds positively to higher farmgate milk prices – assuming production costs remain relatively stable. However with the rapid increase in input cost inflation since summer 2021, GB milk production has been lagging behind year earlier levels.
This deficit in production has persisted into 2022, even through the peak production period. And despite average milk prices* increasing by more than 12ppl since the beginning of the year, we have not yet seen any significant improvement in production.
When looking at how input costs have been climbing in relation to milk prices, it becomes apparent why that production response hasn’t happened. In fact, the delayed response in milk prices to the rapid inflation witnessed in Q4 2021 suggests many farmers will still be working to fully recover the relatively large cost increase from late last year.
*weighted average GB milk prices across all contracts, based on the AHDB standard litre price
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