** SDDG refers to Sainsbury's Dairy Development Group
                                                                                                                  
*** The annual average price is not calculated in the same way as other prices on the league table as it is based on rolling price information - caution should be used in using information for comparison.

# The milk prices listed above will vary according to the amount of milk that is required by each retailer. Additional milk will be paid for at the conventional liquid milk price of Dairy Farmers of Britain (DFB) and Dairy Crest (DC) respectively. The milk price above assumes that all litres produced are sold into the dedicated milk pools.

(1) Unconfirmed Prices

Milk prices are ranked according to the annual average price.  This is the average price that would be paid on a contract for 12 months going forward if the present price schedule remained the same. 

Prices listed above are exclusive of:  Capital Retentions, Administration Charges, Farmer Group Subscriptions, and VAT.

Prices listed above are inclusive of:  MDC Levy, Seasonality. 

Milk Price Changes

Milk prices in the UK show little sign of easing for the summer months of 2008 despite reductions in prices elsewhere in Europe.  Although the average Defra farmgate price in April was 0.86p down on March at 24.91p, this was due to seasonal price fluctuations, and was still 7.36p (41.9%) more than April 2007.

Looking at wholesale markets, UK prices have continued to strengthen in June with prices for butter, SMP and cream increasing compared with May.  Butter increased by £75/tonne (3.4%) to £2300/tonne.  SMP increased slightly between May and June from £2100/tonne to £2120/tonne.  Bulk cream prices also rose between May and June.  A June price of £1007/tonne is £27/tonne (2.8%) more than the previous month.  Cream prices have been helped by the onset of the soft fruit season in addition to continental deliveries being disrupted by recent industrial action.

EU wholesale prices have also shown increases in butter and SMP.  French butter increased by €80/tonne between May and June to €2680/tonne.  Prices have been aided by production falling seasonally, an increase in exports and the placing of 108,000 tonnes into PSA (Private Storage Aid).  SMP prices have also increased for both feed and food quality.  Feed quality SMP has been helped by increased demand from the animal feed industry, particularly veal markets.  However, whey powder prices have fallen by €100/tonne between May and June to €550/tonne.

Elsewhere, world wholesale prices increased for butter and SMP.  With little product available from New Zealand or Australia until the new season begins, prices are affected according to the availability of product from the EU and US.  Butter prices increased by US$200/tonne between May and June to US$3900/tonne (£1986/tonne).

As a result of increases in the prices of UK butter and SMP, AMPE (Actual Milk Price Equivalent) increased by 0.5p between May and June to 26.7p, although this is 0.5p less than June 2007.  MCVE (Milk for Cheese Value Equivalent) fell by 0.41p between May and June to 29.15p.  Although mild cheddar prices remained the same, MCVE fell as whey powder prices fell by £80/ tonne (15.5%).

There have been several price increases announced for May, June and July. 

Price changes for May included a 0.75p increase in the base price of the Dairy Crest Davidstow Contract. There was also a 0.5p increase in the base price on the partnership and SDDG contracts of Robert Wiseman Dairies.

Arla and Dairy Crest announced that farmers on non-assigned milk pool contracts would receive 0.3p from 1 June as a result of the regional supply deal with Morrisons.  This is in addition to the 0.5p already agreed for 1 June taking the increase to 0.8p on standard contracts.  There were also 0.5p increases for Arla ASDA and Dairy Crest SDDG contracts.

Producers on M&S contracts received an increase of 0.6p due to the introduction of an environmental premium to reflect current and future environmental pressures that dairy farmers face.  This premium will be reviewed on a quarterly basis.  Dairy Farmers of Britain has increased the base price on liquid and compositional contracts by 0.5p from 1 June.  Liquid processor Payne’s Dairies has increased its milk price by 0.5p.  Finally in June, Glanbia Llangefni is to increase its price by 0.6p from 1 June.  

Moving into July, Blackmore Vale has made various changes to its contract.  Changes to constituent values, in addition to the introduction of a new collection volume bonus scheme, results in the standard litre annual average price increasing by 1.39p from
1 July.  

Erratum: In the April league table, Graham’s Dairies was incorrectly shown as having a 0.8p increase for April.  The increase should have been applied from 1 May.  DairyCo apologises for this oversight and any inconvenience caused.

May
Dairy Crest Davidstow: 0.75p increase; Graham’s Dairies: 0.8p increase; Robert Wiseman Dairies: 0.5p increase on Partnership and SDDG contracts.

June
Arla: 0.8p increase on standard contract (incl. 0.3p increase from Morrisons), 0.5p increase on ASDA contract; Dairy Crest: 0.8p increase on standard liquid contract (incl. 0.3p increase from Morrisons), 0.5p increase on SDDG contracts and 0.6p increase on M&S contract; Dairy Farmers of Britain: 0.5p increase on contracts; Glanbia Llangefni: 0.6p increase from 1 June; Payne’s Dairies: 0.5p increase from 1 June.

July
Blackmore Vale: 1.39p increase and changes to constituent values and volume payments.

New Seasonality Payments

The last couple of years as seen new seasonality systems being implemented by Arla, Dairy Crest and the 3 main Co-ops.

These payment systems all work in a slightly different way. Milk Link and First Milk have a core volume of milk paid for at an 'A' price, while any surplus milk over that core volume is paid for at a 'B' price, which will be lower than the 'A' price in the spring, but higher in the autumn.

Robert Wiseman Dairies are introducing a new supply profile scheme from 1 April 2008. The average daily supply for each month will be compared with the six month rolling average, giving a percentage on which price adjustments will be made. The profile payment will be made comparing the daily average of the current month's production with the rolling average daily production for the last six months. The base price will be paid to producers who are within 95% and 105% of their rolling average daily production. Those who are outside these margins will be penalised by 0.01ppl for each tenth of a percentage point difference - with a maximum deduction of 2.0ppl.

Arla Foods Milk Partnership (AFMP) is also introducing a new scheme from April 2007. The price the farmer will receive will be based on the "Arla Foods Milk Price Equivalent" (AFMPE), which will be evaluated from the company's returns from SMP and salted butter.  This differs from AMPE which uses unsalted butter prices, which tend to be more expensive than salted.  AFMP members will get a minimum of 2ppl over AFMPE, although a haulage charge will be deducted. 

Please Note: At present, this scheme has been suspended until 1 April 2008.

AFMPE will be calculated on a twelve month rolling basis and will be applied to each producer's Base Annual Dairy Production (BADP).  This is based on each individual producer's average daily production in October and November 2006, and any milk supplied over this level will be subject to the new balancing condition.  The exact value of AFMPE cannot be estimated until details of how it will be calculated are known therefore it is impossible to say whether it is a good deal or not for farmers.

Glanbia and Dairy Farmers of Britain have a system that again calculates an average or core volume but then uses percentage profile payments rather than 'A' and 'B' prices. If you produce more than the core volume in the peak months a deduction is made to the price of all litres of milk produced, and if you produce more than the average volume in the trough months an additional payment is made on all litres.

Dairy Crest also has a percentage profile payment system that encourages farmers to produce a level profile. In months where production is either significantly higher or lower than the daily average of the past six months, deductions to the price for every litre of milk is made. However, they also have a conventional seasonality system that makes deductions in the spring and pays bonuses in the autumn.

Standard Litre

Note: Volume is based on 800,000 litres on EODC (unless only EDC is available) on a profile equivalent to the UK national average profile of the past three years. (Details can be accessed at the link below.)