Milk producers hit by £200m time lag for rising prices

The time lag between the rapidly rising world milk price and that being paid to the primary producers has short changed dairy farmers to the tune of £200 million, according to the English NFU, which has called for buyers to recognise the strength of current markets.

The NFU called on milk buyers to pay British farmers 'fair, sustainable' prices for milk. Picture: John Devlin
The NFU called on milk buyers to pay British farmers 'fair, sustainable' prices for milk. Picture: John Devlin

After two years of turmoil in the dairy sector, during which time milk prices for many farmers have been – and continue to be – below the cost of production, commodity markets have now quickly turned.

According to the union, market signals are pointing “skywards” with spot prices for milk now approaching 40p per litre (ppl) and quotes for next month hitting 50ppl.

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Speaking on the eve of the Dairy Show, which opens today, NFU dairy board chairman Michael Oakes claimed milk buyers were lagging behind in passing on the huge lifts in market prices to their suppliers.

“Since May this year market indicators have started to show a massive differential between what prices dairy farmers should have got compared to what they actually did get,” he said. “Between June and September this adds up to around £200m.”

Currently most non-aligned or non-contracted prices are still at or below 20ppl, with the UK’s Department for Environment, Food & Rural Affairs average milk price for August, which included aligned prices, only reaching 21.34ppl.

“Clearly milk buyers should be concerned as to where their future milk supply will come from,” said Oakes, pointing to a Northern Irish milk buyer who has offered producers an extra 4ppl on top of the 2ppl winter premium.

“Farmers have been patient, understanding the time lag that is part of dairy trade. But that reason is starting to wear thin, as we need to start considering increased costs of winter housing and feeding.

“Our message is clear – until milk buyers start backing British dairy farmers and start paying fair, sustainable milk prices, volumes will not recover.

“Dairy farmers want to produce milk and the only way milk buyers can pull the dairy sector out of this nose dive is to quickly pay them a profitable price for their milk.”