Definition of IMPE and AMPE

The EC offers support arrangements called Intervention for the manufactured products unsalted butter and skim milk powder (SMP). Intervention is available at certain times of the year and when market prices for these products reach or fall below levels specified by the EC. Intervention can therefore provide a floor in the market place for butter and SMP. No Intervention arrangements exist in the raw milk market, but a raw milk equivalent to the Intervention price can be computed, and is known as the Intervention Milk Price Equivalent (IMPE).

The IMPE is calculated

• by using yield conversion factors to calculate the value of a litre of milk that has been manufactured into Intervention products and sold into Intervention, and

• from this computed value of a litre of manufactured milk, a deduction is made of an assumed cost of manufacture to give an equivalent raw milk price.

The IMPE is regularly calculated by many buyers and sellers in the raw milk market as one of several benchmark prices used in the industry.

In practice, the market prices for butter and SMP can be higher or lower than Intervention prices. At any point in time, trades in butter and SMP can be markedly different, and so to gain a view of trends in the market place, estimates of average prices in the market place are made. These average market prices can be inserted in place of Intervention prices in the IMPE calculation, to give a market value for raw milk that is manufactured into butter/SMP. This is known as the AMPE (The Actual Milk Price Equivalent) and is another benchmark used in the industry.

Both the IMPE and the AMPE are prices for raw milk delivered to dairy. It is also possible to compare trends in the AMPE with trends in UK Milk Producer Prices. This is done by deducting an assumed cost of 1.5 pence per litre from farm gate to factory gate (obviously, different sellers will incur different costs of doing this).

Source: DIN